Walmart Inc. has asked its cosmetics suppliers to consider sourcing their goods in countries outside of China, one of the first signs that the world’s largest retailer hopes to dilute the impact of the Trump administration’s looming tariffs.
A “large amount” of items in the cosmetics category fall under the most-recent proposed levies on Chinese goods, according to an Aug. 7 email sent from Walmart’s procurement division to some of its cosmetics suppliers. The list of Chinese goods that could get hit with additional tariffs includes lipstick, eye makeup, powders, shampoo and other haircare products. The missive asks suppliers if they have facilities outside of China, and if not, whether they would consider investing in some to broaden their sourcing ability.
“We are closely monitoring the tariff discussions and are actively working on mitigation strategies, particularly in light of potentially escalating duties,” Walmart spokesman Randy Hargrove said. “One of those mitigation strategies is to understand what our suppliers are doing and what their plans and alternatives are.”
‘Difficult to Quantify’
The impact of the tariffs “is difficult to quantify,” Walmart Chief Financial Officer Brett Biggs said when the retailer released second-quarter results Thursday. In that statement, Walmart downplayed its reliance on Chinese suppliers.
“We buy more merchandise, by a wide margin, in the U.S. than from any other country,” the company said.
That’s certainly true for its massive U.S. food business, but Walmart’s sprawling supply chain includes more than 100,000 vendors around the globe.
“Walmart does source a lot from China,” Brian Yarbrough, an analyst at Edward Jones, said. “They’ve made a big push on U.S.-made stuff, but it’s still small.”
France’s L’Oreal SA is the world’s biggest cosmetics maker, with a stable of brands that includes Maybelline mascara and Garnier shampoo. Walmart is the company’s biggest customer, accounting for just under 5 percent of its sales, according to Bloomberg data. Its main rival in the cosmetics aisle is Coty Inc., which sells beauty items under the Covergirl, Max Factor and Clairol labels. Coty derives 7 percent of its sales from Walmart.
Coty and L’Oreal didn’t reply to requests for comment.
In company filings, Walmart concedes that U.S. foreign trade policies could hurt its results, saying in its annual report that tariffs “are beyond our control.” Greg Melich, an analyst at MoffettNathanson, said Thursday that a full-blown Chinese trade war could eliminate half of the retail industry’s earnings growth next year. Retailers have two primary responses to the tariffs, analysts say: Raise prices or get their products elsewhere.
The email to makeup companies, however, shows that Walmart is also actively looking for other ways to circumvent the tariffs, asking its suppliers, “Any resources or ideas so far?”
