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Wal-Mart Stores Inc (WMT) Criticizes Border Tax, And Rightfully So

Retail stocks could suffer, but I believe the border-adjustment tax to be dead on arrival

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The Dow Jones Industrial Average toppled another milestone Wednesday, breaching 21,000. One reason markets have continued to hit new highs is the expectation that President Donald Trump will soon unveil a plan for lower taxes on both corporations and consumers, which comes with a caveat that would hurt Wal-Mart Stores Inc (NYSE:WMT), among other retailers.

Treasury Secretary Steve Mnuchin told reporters last week– including Maria Bartiromo, my colleague at Fox Business — that tax reform is the primary objective.

While the plan is heavily anticipated throughout the market, one large aspect of it has the retail industry on edge: the border-adjustment tax.

The president has hinted that corporate taxes will favor U.S. exporters over importers, and earlier this month it was announced that more than 100 retail companies had joined a coalition against a border-adjustment tax that would affect imports from other countries while leaving exports untouched.

The group is called Americans for Affordable Products, and Walmart, Target Corporation (NYSE:TGT) and Best Buy Co Inc (NYSE:BBY) are among its most notable participants.

What This Means for WMT Stock

Considering approximately 97% of all clothing and shoes sold in the United States are imported, it’s no surprise that Walmart is critical of a border-adjustment tax. CFO Brett Biggs said “anything that would potentially raise prices for our customers in the U.S. is a concern for us.” Should any such tax come to fruition, the company would be forced to either eat the increased costs or pass them on to consumers.

Biggs’ comments came just after the company reported its fourth-quarter earnings results. Comparable store sales grew 1.8%, the strongest growth since July 2012 and tenth consecutive month of year-to-year improvement. Revenue guidance for the current quarter and fiscal year were above consensus and e-commerce sales grew 29%. A lot of the headlines focused on that along with the Jet.com acquisition, but it’s also worth noting that the brick-and-mortar side of the business sans groceries seems to have found equilibrium as well.

In the end, Walmart has displayed the kind of nimbleness many, including myself, weren’t sure it was capable of, after having things so good for so long. There are still issues with proper shelf stocking and having items people want versus those they don’t, but considering the devastating impact of food deflation and fading brick-and-mortar traffic, WMT continues to execute well. Then there’s its online presence, which is growing rapidly, but still has a long way to go from aesthetics to function.

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Article printed from InvestorPlace Media, http://investorplace.com/2017/03/wmt-criticizes-border-tax-and-rightfully-so/.

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