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Walmart’s size may not shield it from rising prices | Providence Journal

It’s getting more expensive for retailers like Walmart 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, Nestle, Coca-Cola 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.

“We are feeling the pressure,” Nestle finance chief Francois-Xavier Roger said on a late July call with analysts when discussing freight inflation. That same week, Michael Hsu, chief operating officer at Huggies maker Kimberly-Clark, said “it’s clear that we need more” price increases.

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 or deep-discounters like Dollar General 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.”

The pricing tension isn’t the only thing weighing on Walmart lately. The tightest trucking market in years hits Walmart just as hard as its suppliers. The employee wage hike it announced earlier this year has now fully kicked in, along with other benefits like a college-tuition subsidy that could cost billions. And it’s still spending like mad to expand its e-commerce business, rolling out curbside pickup of online grocery orders and paying $16 billion to acquire most of India’s leading — yet money-losing — online retailer.

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Walmart’s size may not shield it from rising prices.

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