Four of the main retail groups in the United States — including the country’s and the world’s largest, Walmart — have highlighted in their respective second-quarter earnings presentations the complexities their businesses face due to tariffs imposed by the Trump administration. These tariffs have been the main topic of discussion for Walmart, Home Depot, Target, and Lowe’s — listed retailers that are already feeling, to a greater or lesser extent, the effects of this trade policy.

As for results, the impacts have been cushioned by the companies’ swift reaction, which involved applying various price increases, as well as activating efforts to achieve greater cost efficiencies. As Walmart’s president and CEO Doug McMillon acknowledged: “We’ve continued to see our costs increase each week, which we expect will continue into the third and fourth quarters.” Target’s CEO, Brian Cornell, echoed this sentiment: “The straight cost impact of tariffs will be with us as long as the tariffs are with us.”

All eyes were on Walmart. The global retail giant had already warned, in its first-quarter earnings release, that it could not absorb all the cost pressures resulting from tariffs, given the company’s — and the industry’s — thin margins. Even U.S. President Donald Trump pressured the company to absorb those expenses against its margins.

“We’re doing what we said we would do,” Doug McMillon explained last week. “We’re keeping our prices as low as we can, for as long as we can,” he added, reflecting the constant pressure on costs that continue to rise. “As we replenish inventory at post-tariff price levels, we’ve continued to see our costs increase each week, which we expect will continue into the third and fourth quarters.”

Protecting margins

According to its financial disclosures, Walmart has acted surgically on its pricing to protect its margins. The group increased its revenues in the first half of the year by 3.7%, compared with a 3.6% increase in procurement costs, allowing it to hold steady and even gain a tenth of a point in gross margin. The same pattern is seen in the second quarter alone: sales grew by 4.75%, while costs rose by 4.7%.

“We’re focused on the customer, kind of the fundamentals of the business, whether it’s pricing or inventory management,” McMillan explained. On the latter point, tariffs are also making themselves felt. In Walmart’s case, inventory value rose in the first half of the year by $2.1 billion, up 3.7% from a year earlier, “due to higher import costs.”

The retail giant clarified that most of its purchases are made in the U.S., while one-third come from abroad — mainly China, Mexico, Vietnam, India, and Canada. In the case of China, it is facing the looming threat of a 145% tariff, up from the current 30%.

Diversification of import sources is now a key concern for U.S. retailers. “Our teams have done an incredible job partnering with our vendors to diversify product sourcing,” Home Depot’s executive vice president, Billy Bastek, said last week. “We will continue to work with our vendors to ensure that we have the right products at the right value in stock.” He specified that 50% of its merchandise is not subject to tariffs since it is sourced within the U.S.

Home Depot — the world’s largest home improvement retailer — acknowledges that there will be “modest price movements for some categories” because current tariffs “are significantly higher than last quarter,” according to Bastek. He also announced a reduction in promotional activity for part of its offerings.

Like Walmart, Home Depot has fine-tuned its pricing strategy, especially in the second quarter. During that period, its revenues grew 4.86%, while procurement expenses increased 4.84% — enough to support its margin.

Exposure to foreign markets

Two other major U.S. retailers are more exposed to high levels of imports. Lowe’s — which also specializing in home improvement products — sources 60% of its merchandise outside the U.S., with 20% coming from China. “It wasn’t that way seven years ago,” said Lowe’s chairman and CEO, Marvin R. Ellison, last week. “We have done, in my estimation, an excellent job of working cross functionally relative to looking for diversification.”

Like the rest of the sector, Lowe’s is also applying price increases with a category-specific approach. “Specific to pricing, we said […] we would be pricing competitive […] That’s what we’re continuing to do,” said Ellison. “Prices in retail will always be dynamic. Your prices will fluctuate up and down through various categories based on competitive responses, internal algorithms.” The company’s sales rose 1.6%, while procurement costs increased by 1% — another case of protecting margins.

Target, meanwhile, acknowledged that, “as one of the largest importers in the country, the prospect of higher tariffs meant we were facing some major financial and operational hurdles,” said Cornell, who will step down as CEO next year. The company’s trajectory is further complicated by “multiple changes in tariff policy that have been announced and implemented as the year has progressed,” he added.

For this reason, the supermarket chain has adopted various mitigation strategies, including “diversifying” production and sourcing countries. “We have many levers to use in mitigating the impact of tariffs, and price is the very last resort,” said Target executive vice president, Rick Gomez, last week.

The company — one of the benchmarks in traditional retail — has posted declining sales for three consecutive years, a trend that continued into the first half of this year. Sales fell 1.9% in that period, though the decline eased to 0.9% in the second quarter. Its inventory rose 2%, “reflecting higher product costs than a year ago, driven by tariffs and other pressures.”

Of the four companies analyzed, Target was the only one whose gross margin worsened in the second quarter. It declined by one percentage point, after merchandise costs increased 0.5% while sales fell 0.9%. The company expects to complete its recovery in 2026.

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