It’s getting more expensive for retailers like Walmart Inc. to stock its shelves with household staples like diapers, paper towels and bottled water. The question now is whether that translates into more pain at the check-out line.
Soaring costs for transportation and raw materials — some related to tariffs — have prompted Procter & Gamble Co., Nestle SA, Coca-Cola Co. and others to announce price increases this summer on a wide swath of consumer staples. The companies are betting that demand will remain steady even though wage growth is tepid and Americans’ wallets are already getting pinched by higher gas prices during the peak summer driving season.
Now it’s Walmart’s move. The world’s biggest retailer faces some hard choices as it prepares to release second-quarter results Thursday. It may choose to pass along those price hikes to consumers. But that’s a riskier move nowadays as shoppers can easily defect to Amazon.com Inc. or deep-discounters like Dollar General Corp. and Aldi. Walmart could also play hardball with suppliers, perhaps by demanding rebates elsewhere or promoting its own portfolio of more affordable store-brand products.
“The consumer-product makers are seeing their costs go up, and they have to pass them through,” said Ken Harris, managing partner at Cadent Consulting Group. “But the retailers are negotiating hard against price increases because they know that whatever they do from a pricing standpoint is totally transparent in this environment.”