Walmart (WMT) may be raising their prices, passing on higher costs to consumers and following in the footsteps of other retailers that have had to do the same. Coca-Cola and others have had to announce price increases over the summer, as gas prices rose during peak driving season.
Walmart’s second-quarter earnings beat may be enough for the retailer to hold off on raising prices as it continues to compete with Amazon (AMZN).
Amazon, known for low prices and two-day shipping, is the company’s main competitor. Walmart expects a 40% rise in e-commerce sales growth on the year. The company’s profit margins have been hit by increased investments and higher transportation costs.
Investments have helped the company post its strongest quarter for stores open for at least 12 months in more than a decade.
Shrinking profit margins may be enough for Walmart to sway from its strategy of reducing prices to compete with grocers and Amazon. Walmart also announced a raise hike that is in full swing along with additional benefits, including college-tuition programs. The additional costs are expected to cost the company billions of dollars.
Walmart is also working on sustainability programs, one which the company has been passionate about for over a decade.
According to a research paper, Walmart is on a mission to create zero waste, self-sustainable products and power their business using 100% renewable energy. Project Gigaton is the company’s initiative that aims to reduce its emissions by 2030 by 1 billion metric tons across its supply chain. The company is also working with nonprofit organizations that help end forced labor in the supply chain.
The company’s ambitious environmental goals, rising costs and its increased competition may hit the company’s stock over the short-term. The company’s stock is down over 4% year-to-date after two years of strong growth, as investors wait and see what the company will do to restore profit margins.
Experts agree that Walmart must continue to heavily invest in e-commerce to help keep the attention of customers that would rather shop online than deal with crowds in the company’s stores.
Chinese tariffs may also play a role in the company’s decision to raise prices. Executives have already held meetings to discuss their holiday plans, and Walmart is one of many retailers that have ordered Chinese goods for the holiday season in June. The company is taking precautions to stock up on holiday items before tariffs go into effect, raising the price of goods in the process.