Walmart warns it may have to raise prices due to fuel costs
Higher fuel prices due to the war with Iran are putting pressure on Walmart’s customers and supply chain, and could lead to higher price tags on the shelf.
Consumers may face higher retail prices in the coming months due to higher-than-planned fuel costs in global distribution and fulfillment operations and the rising cost of food manufacturing, CFO John David Rainey warned on a call with investors Thursday morning.
This comes as higher fuel prices are already putting pressure on household budgets, Rainey also said. One example of how customers are already responding to the higher fuel prices is that the average number of gallons customers filled up with at the company’s gas stations fell below 10 for the first time since 2022, according to Rainey. “That’s an indication of stress,” he said.
Rainey added that members of the Walmart+ paid subscription service are also tapping into their fuel savings benefits more today than in the past. Walmart+ members save 10 cents per gallon at Exxon, Mobil, Walmart and Murphy stations.
The effects of higher fuel prices and the Strait of Hormuz closure represent “real impacts to cost of goods sold for us and our suppliers,” Rainey said. “If the current elevated cost environment persists, we expect somewhat higher retail price inflation in Q2 and the second half of the year.”
Rainey said the food category, for example, is heavily dependent on fertilizer, which he said is made with nitrogen and phosphates that are heavily dependent on the Strait of Hormuz.
Still, Rainey said the company’s fast-growing membership and advertising revenue insulate it from macroeconomic factors. The company reported a 7% year-over-year rise in revenue and operating income growth of 5%. Its global e-commerce business grew 26%, with its global advertising business up 37% and membership fee revenue up 17%.
“Our long-term growth strategy is clear,” Rainey said. “We continue to execute while also maintaining flexibility to take advantage of the short-term share gain opportunities as they emerge.”
Tariff refunds could also help Walmart blunt the blow of the fuel costs, but Rainey said the company is not including them in its financial guidance for the year. He said the company is in the process of trying to get refunds, but that the maximum it may be eligible to receive as importer of record represents less than half of 1% of its U.S. annual sales. That’s less than $2.9 billion when applied to Walmart’s U.S. sales of $581 billion last year.
“We felt it best to provide guidance that reflects our expectations for the underlying business, excluding any recovery of tariffs paid,” Rainey said.
He said the company plans to invest any returns from tariff refunds into prices.
“We think the single best return that we can have on a dollar of capital right now is to invest in the customer and invest in price,” Rainey said. “We’ll continue to lean in and try to be there for our members and customers in this environment.”
CEO John Furner reiterated the company’s optimism. “Our merchants have a lot of levers to be able to navigate all sorts of environments,” he said. “We’re positioned well to weather all environments, and we’ll continue to do the right things in terms of investing in the best proposition for our customers throughout the quarter.”