Walmart Faces Backlash Over Price Hikes and Return of Basket Fee
Customers are voicing strong concerns as Walmart announces plans for “unprecedented” price increases this month, citing tariffs as the primary reason. However, on our channel, we’ve discussed that we believe this move is largely driven by profit-seeking and potentially price gouging. We’ve seen that much of the tariff situation has settled, with the China tariff on pause temporarily and rates having been negotiated down. In fact, the current tariff rate with China, which is 30%, is significantly lower than the 145% rate that Walmart previously indicated they would absorb without jacking up prices. It appears contradictory for Walmart to now claim unprecedented price increases are necessary when tariffs are lower than when they were willing to eat the cost.
Walmart CFO, Rainey, has described the speed and magnitude of these incoming price increases as “somewhat unprecedented in history”. While Walmart has started increasing markups on some items, like bananas which went from 50 to 54 cents a pound, we believe they have known about the potential for tariff costs for months and haven’t made apparent efforts to find alternative suppliers from countries not facing tariffs. We feel they are simply “lying to people” and will “price gouge because they can”.
Interestingly, Walmart reported strong sales figures recently. US same-store sales jumped 4.5%, Sam’s Club sales were up 6.7%, and US e-commerce sales saw a 21% rise, marking its 12th consecutive double-digit gain. Global online sales also increased by 22%. This suggests that Walmart has been performing well, with sales booming as shoppers sought their discounts amid trade war fears. Despite this, net income did see a decrease from 5.1 billion to 4.5 billion, and revenue missed expectations slightly for the first time since February 2020. However, we believe the primary driver for increasing prices is the desire for more money for shareholders, especially given the company’s overall strong performance.
Adding to customer frustration, Walmart has also quietly brought back a minimum basket fee. This policy reinstates a $7 fee for orders below $35. While some online speculation linked this fee to tariffs, a spokesperson told Mashable the fee and tariffs are not related. The stated purpose is to cover the cost of preparing and packing an order. However, we question why this cost wouldn’t exist for orders paid for with a credit card, for example. We see this more as a way to “guilt you into to force you to buy more products” and simply another method to collect more money, especially after a slight revenue miss.
Notably, the reintroduction of the basket fee specifically impacts Americans using food stamps or SNAP benefits (EBT). The fee had been removed for SNAP recipients during prior lockdowns but is now being reinstated for customers with EBT cards saved to their account. While 42 million people in America receive food stamps, and some states are looking to ban their use for unhealthy items like soda and candy (which we agree with in Indiana where an executive order was signed by Mike Bronson), we are still unclear why the basket fee specifically targets EBT users differently from other payment methods.
In our view, Walmart’s actions, both the announced price hikes and the basket fee return, are less about external pressures like tariffs and more about maximizing profits and shareholder value, particularly as they expect to emerge from periods of uncertainty with greater market share.