Caught in the Trade War Crossfire

Walmart is feeling the heat as tensions rise between the United States and China over escalating tariffs. Chinese officials confirmed on Thursday that they had met with executives from the U.S. retail giant following reports that Walmart pressured its Chinese suppliers for discounts to offset the impact of new tariffs imposed by President Donald Trump.

“Our relevant departments have reached out to Walmart to further understand the situation, and the company has provided an explanation,” said He Yongqian, a spokesperson for China’s Commerce Ministry. However, no further details were provided.

Trump’s Tariff Hike Sparks Backlash

Last week, President Trump doubled tariffs on all Chinese imports, raising them to 20%. In retaliation, China imposed fresh tariffs on U.S. agricultural imports, which took effect on Monday.

Many businesses are struggling to adjust to the rapid shifts in trade policy, with retailers warning of potential price hikes as inflation squeezes consumers. Walmart, the world’s largest retailer, is no exception.

Walmart’s Request for Supplier Discounts

To mitigate the financial strain, Bloomberg reported that Walmart has asked some of its Chinese vendors for price cuts of up to 10%. The move aims to absorb the cost of U.S. levies without significantly raising prices for American consumers.

However, Walmart’s approach has not gone unnoticed by Chinese authorities. On Wednesday, state broadcaster CCTV’s social media platform, Yuyuantantian, posted a warning, stating:

“Walmart’s demand for Chinese suppliers to bear the full tariff burden is unreasonable and disrupts fair competition and international trade order.”

The post also hinted that Chinese authorities could take further action if Walmart continues pressing suppliers for lower prices.

Chinese Suppliers Already Under Pressure

While price negotiations are common in China’s business landscape, Walmart’s request comes at a time when many Chinese manufacturers are already struggling with thin profit margins. Increased production costs and supply chain disruptions have made it challenging for suppliers to offer additional discounts.

In a statement to CNN, Walmart defended its actions, stating:

“Our goal is to help people save money and live better. Our conversations with suppliers are aimed at making that a reality for millions of customers. We will continue to work closely with them to navigate these uncertain times.”

Walmart’s Significant Presence in China

Walmart is not just a major U.S. retailer sourcing products from China—it also has a thriving business within the country. The company entered China in 1996 and opened its first superstore and Sam’s Club in Shenzhen.

Today, Walmart operates in more than 100 Chinese cities. In its most recent financial year, the company reported a 16% increase in net sales, reaching $17 billion in China.

What’s Next?

As the U.S.-China trade war intensifies, Walmart’s operations in both countries remain vulnerable to ongoing tensions. If Chinese authorities decide to take action against the retailer, Walmart could face further challenges in its supply chain and market position.

For now, Walmart is walking a tightrope—balancing its relationship with Chinese suppliers while trying to shield American consumers from rising prices.

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Kohl’s has announced it will close 27 of its underperforming locations across 15 states by April. While this represents only a small portion of its 1,150 stores, the move is part of the department store chain’s efforts to boost profitability and turn around its struggling sales. The closures come after Kohl’s has posted 11 consecutive quarters of declining sales.

Leadership Change as Kohl’s Works to Revive Business

Kohl’s new CEO, Ashley Buchanan, will take over the reins next week. Buchanan, a retail veteran and current CEO of Michaels, will succeed Tom Kingsbury, who has served as Kohl’s interim CEO since December 2022. Kingsbury will continue to advise the company and remain on the board until his scheduled retirement in May 2025.

Store Closures and Employee Impact

Kohl’s has not disclosed how many employees will be affected by the closures, but the company has assured workers that they were informed in advance. A “competitive severance package” has been offered to those impacted, along with opportunities to apply for other roles within the company. Of the 27 stores closing, 10 are located in California.

Department Stores Face Growing Challenges

Kohl’s struggles reflect broader challenges facing U.S. department stores. As consumers continue to shift towards online shopping, traditional department stores are feeling the pressure. Kohl’s aims to address these challenges by focusing on long-term growth strategies, though it acknowledged that some difficult decisions—like store closures—are necessary to ensure the health of the business.

Macy’s Also Closing Stores in Effort to Boost Sales

Kohl’s is not alone in its efforts to streamline operations. On Thursday, Macy’s revealed it will close 66 underperforming stores, including one in a historic Philadelphia landmark. These closures are part of a broader strategy to shutter 150 stores by 2026, while upgrading the remaining 350 locations. Macy’s has been facing similar struggles, with falling profits and sales in its most recent fiscal quarter. Despite raising its sales expectations for the current fiscal year, Macy’s also lowered its profit projections.

Macy’s closures account for 25% of its overall square footage, though they contribute to less than 10% of its sales.

A Shift in Consumer Behavior

Both Kohl’s and Macy’s are grappling with changing consumer behavior, as shoppers increasingly seek out deals online and spend less on discretionary items due to ongoing inflation. As these department stores attempt to regain their footing, the focus is on adapting to evolving shopping trends and managing costs to stay competitive in a challenging retail environment.

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Macy’s is accelerating its store closure plans, announcing it will shut down 65 locations this year—an increase from the 50 closures previously scheduled for the fiscal year. This move is part of the company’s larger strategy to eliminate around 150 underperforming stores over the next three years.

The update was shared during Macy’s third-quarter earnings call on Wednesday.

Post-Holiday Closures Expected

“We now expect to close roughly 65 locations this year,” said Macy’s CEO Tony Spring. He added that the closures would occur after the holiday shopping season.

The announcement comes as Macy’s addresses broader challenges within the retail industry, including dwindling mall traffic and rising online shopping trends.

Accounting Scandal Revealed

Macy’s had delayed reporting its third-quarter earnings after uncovering a $151 million accounting error tied to small-package delivery expenses. An independent investigation found that a single employee intentionally falsified accounting records and documentation.

Adrian Mitchell, Macy’s COO and CFO, clarified that the issue did not involve theft and had no impact on revenue, cash flow, or inventory, as all vendors were fully paid. The company is now revamping its financial reporting controls to prevent future issues.

Department Stores Face Industry-Wide Challenges

Macy’s closures reflect broader struggles in the retail sector. With fewer customers visiting physical stores, U.S. retailers have announced over 7,100 store closures by the end of November 2024—a 69% increase compared to the same period last year, according to CoreSight Research.

The number of retail bankruptcies has also surged, with 45 retailers filing for protection in 2024, compared to 25 in 2023.

Largest Retail Store Closures in 2024

The retail chains leading store closures in 2024 include:

• Family Dollar: 677 closures
• CVS Health: 586 closures
• Big Lots: 580 closures
• Conn’s: 553 closures
• Macy’s: 55 closures

Macy’s Strategic Shift

Despite challenges, Macy’s is focusing on growth through its Bloomingdale’s and Bluemercury brands. Over the next three years, the company plans to:

• Open 15 new Bloomingdale’s stores.
• Launch 30 new Bluemercury locations.
• Remodel 30 existing Bluemercury stores.

Stock Performance

Macy’s stock has dropped approximately 20% over the past year, reflecting investor concerns amid the company’s restructuring efforts and broader retail struggles.

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