The largest U.S. retailers — Walmart, Home Depot, Target, and Lowe’s — have highlighted growing challenges from tariffs imposed under the Trump administration. In their second-quarter earnings presentations, executives warned that rising import costs are pressuring margins, forcing adjustments in pricing, sourcing, and inventory management. While swift strategies have softened the blow, the outlook for the second half of the year remains uncertain.
Walmart’s Balancing Act
Walmart, the world’s largest retailer, has been most vocal about the impact of tariffs. CEO Doug McMillon noted that costs are increasing weekly as inventory is replenished at post-tariff levels, a trend expected to continue into late 2025. To protect profitability, Walmart has raised some prices and managed inventory more carefully, helping revenues rise 3.7% in the first half of the year compared with a 3.6% increase in procurement costs. Still, inventory value jumped by $2.1 billion due to higher import expenses, with China remaining a major source of exposure as tariffs threaten to rise from 30% to 145%.
Home Depot Adjusts Sourcing
Home Depot has also fine-tuned pricing and sourcing strategies. Executives emphasized diversification, with half of its merchandise sourced domestically and therefore shielded from tariffs. Revenues rose 4.86% in the quarter, nearly matching a 4.84% increase in procurement costs, keeping margins intact. Some categories are seeing “modest” price hikes, and promotional activity has been reduced. The company stressed that careful vendor partnerships have been critical in navigating tariff headwinds.
Lowe’s and Target Face Higher Exposure
Lowe’s, with 60% of its merchandise sourced abroad and 20% from China, remains more vulnerable. CEO Marvin Ellison pointed to efforts to diversify imports, though rising costs persist. Lowe’s grew sales by 1.6% while procurement expenses rose by 1%, maintaining margin stability. Target, by contrast, has struggled the most. As one of the country’s largest importers, it has faced significant disruption from shifting tariff policies. Sales fell 1.9% in the first half, though the decline eased to 0.9% in the second quarter. Still, its gross margin dropped by one percentage point, making it the only retailer of the four to post margin erosion.
Sector-Wide Strategies
Despite their differences, all four retailers are pursuing similar strategies: selective price increases, diversification of sourcing, and tighter inventory management. Executives stressed that protecting consumers from the full impact of tariffs remains a priority, but acknowledged that ongoing cost pressures may force further adjustments. Target has warned that it does not expect a full recovery until 2026, underscoring the prolonged challenge tariffs present to U.S. retail.
Conclusion
Tariffs have emerged as a central issue for U.S. retail giants, influencing everything from pricing strategies to supply chain diversification. While Walmart, Home Depot, and Lowe’s have managed to stabilize margins, Target continues to face financial strain. As tariff uncertainty persists, these companies are signaling that protecting affordability for customers will come at the cost of increasingly complex financial and operational maneuvers.
