Imagine you’re the top brass at, say, Walmart, and suddenly you realize a large quantity that you buy sell at every-day-low-prices are going to be subject to tariffs, what do you do?
If you listen to Walmart earnings calls, this is what they’ve done, at least according to CEO Doug McMillon:
- “We’re keeping our prices as low as we can for as long as we can.”
- The company’s merchants, among other things, “have acted with urgency to avoid what would have been additional pressure for our customers and members.”
- Company merchants also “managed to generate rollbacks” from its non-U.S. suppliers. That means some of the costs of the tariffs were shares by Walmart and the suppliers.
- They “made good quantity and flow decisions.” Translation: They didn’t buy too many products than were needed. They achieved efficient delivery schedules.
Walmart customers appreciated the effort. Sales were up in the second quarter. Profit was up, too. And Walmart investors are happy, too. The shares are up 35% for the year to date. Walmart’s next earnings report comes on Nov. 20.
But notice what McMillon said.
- Customers probably saw price increases but not big price increases. So far.
- Walmart was able to control its inventory costs by getting its suppliers from outside the United States to share in the tariff costs.
- The company’s product buyers were able to buy goods carefully and strategically.
All of the effort cost someone a little money.
Walmart is a gigantic company, and it has the financial sophistication and the economic power that comes with it to make the process work for the company and its shareholders. This group includes the Walton family who own or control about 46% of the shares, a stake currently worth about $395 billion.
Costco Wholesale has coped with tariffs much as Walmart has. It’s getting suppliers to share the pain, as it were. It accelerated much of buying schedules. But there are instances when a supplier has been asked to move its production to a country not so exposed to high tariffs.
Tariffs: a challenge no matter a company’s size
Not all companies can pull off what Walmart or Costco can with a global footprint and financial systems that have become increasingly sophisticated with huge investments in artificial intelligence. Some companies have had no choice but to raise prices.
Others are requiring more drastic moves.
Orvis, the legendary outdoor and fishing merchant, announced this week it expects to close 36 locations by early 2026.
Orvis’ business model has been hit hard by “an unprecedented tariff landscape,” company president Simon Perkins said in an interview with Fox Business. Perkins’ family has owned Orvis, based in Manchester, Vt., since 1965.
Image source: Shutterstock
The 169-year-old company will refocus its efforts on its core outdoor businesses and give up selling Orvis-branded sportswear, fine gifts, home furnishings, luggage and travel accessories.
It’s not known how many employees may be cut. Orvis currently has about 1,500 employees. The closures include 31 retail stores and 5 outlet stores or half of its “physical store presence.” A store in Charleston, S.C., will close on Christmas Eve.
Orvis is not alone. Competitors such as REI and Eddie Bauer are also cutting operations back. So are department stores and other retailers that import much of their inventories.
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Tariffs, whether for inventory or new equipment, are weighing on all of them.
Coping with the tariffs may cost businesses upwards of $1.2 trillion in 2025 alone. Next year, with adjustments in place, as giants like Walmart, Costco, Target and others have made, the hit may be smaller, according to a study from S&P Global Market Intelligence.
S&P’s study, released this week, is built on data generated by analyses from 15,000 sell-side analysts who cover publicly traded companies. The analysis breaks the data into four pieces:
- $905 billion in margin compression. About two thirds of those costs will be passed on to consumers.
- Companies will eat $315 billion in the form of lower profits.
- The report estimates another $155 billion is the effect of the tariffs on publicly-traded companies that don’t get analyst coverage.
- Lastly, $123 billion affects companies owned by private-equity firms and venture-capital firms that don’t report results.
And none of those estimates include companies such as private, sole proprietorships or partnerships that don’t fit into any of these buckets. So, Drew Bowers and Daniel Sandberg, the study’s chief authors, concede their analysis is “highly conservative.”
An example: Village Lighting, a 20-year-old Utah retailer of Christmas products. For years, just before Christmas, Village Lighting owner Jared Hendricks told CNBC, he would tap into a $2 million credit line secured by his home to finance the next year’s inventory. The credit line would be paid down during the year.
This year, the credit line covered just the tariff costs.
If businesses can’t cut costs or employees to regain profitability or at least arrange new financing, bad things can happen. Like bankruptcy or liquidations. Commercial bankruptcies are up 4% in in the first nine months of 2025, says Epiq AACER, a leading source of U.S. bankruptcy data. (Individual filings are up 11% in the same period.)
So, for many businesses like Christmas shops, apparel stores or car dealers importing vehicles from, say, Japan, tariff pressures add to the day-to-day stresses of running the business.
Across the global equity world, sell-side analysts say tariffs are eroding their profit margins by 0.64% this year, compared with what the analysts were projecting on Jan.1 The analysts agree with the Trump Administration’s assertion the pressures from tariffs will ease. The S&P report suggests the analysts see the margin compression will shrink to 0.28% in 2026 and 0.16% to 0.18% in 2027-to-2028.
That is, If things work out. And we all know a forecast is not the same thing as actual results.
Related: Global businesses hit with $1.2 trillion tariff bill
Who really gets hit by tariffs?
Good question.
What the report does not make clear is who shoulders the greater price burden from the tariffs.
The Administration has offered two theories:
First argument: The costs will be borne by exporters.
As Walmart’s McMillon or Utah lighting retailer Hendricks can tell you, their businesses are writing checks to cover the tariffs.
So tariff pressures add to the stress and costs of running a business.
Second argument: The affluent pick up up most of the costs.
Maybe, but the rich “are having a party,” analyst Dario Perkins of TS Lombard told Fortune.com. “And the poor are having a recession.”
Maybe S&P’s Bowers and Sandberg can settle the argument when they get more data.
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