Price increases due to tariffs are just weeks away. Despite that warning from Walmart on Thursday, shares of the retail giant and two others stand the best chance to still thrive in this environment. We own both of them: Costco and Amazon . “There are going to be [price] hikes. The question is who can eat them, who can afford it — and then most importantly, who has the scale to say to the suppliers, ‘We’re not paying that price,'” Jim Cramer said during Thursday’s Morning Meeting for Investing Club members. “He who has the biggest balance sheet in retail wins, and Walmart and Costco have the biggest balance sheets,” along with Amazon. The reality of tariffs hit home in a big way when Walmart CFO John David Rainey told CNBC that even temporarily paused China duties at 30% are “still too high” for any retailer or supplier to shoulder. “I’m concerned that the consumer is going to start seeing higher prices. You’ll begin to see that, likely towards the tail end of this month, and then certainly much more in June,” he said, shortly after Walmart reported mixed fiscal 2026 first quarter and reiterated full-year guidance. Walmart is known for its “Everyday Low Prices” strategy that keeps shoppers coming back during all kinds of economic ups and downs. Through its size, buying power with suppliers, and private label brands, Walmart can afford to keep prices lower by accepting tighter profit margins to sell incredibly high volumes of merchandise. It’s been a tried-and-true formula for success — that Costco and Amazon use as well. That’s why Walmart investors grew concerned when management said tariffs could lead to “downside risk” to profits. “We will do our best to keep our prices as low as possible. But given the magnitude of the tariffs, even at the reduced levels announced this week, we aren’t able to absorb all the pressure given the reality of narrow retail margins,” Walmart CEO Doug McMillon said on the post-earnings conference call. WMT COST,AMZN YTD mountain YTD performance Shares of Walmart, down as much as 5% right after the open, were able to climb steadily through the session, cutting losses to roughly 1%. Weakness in Amazon shares for a second straight day came after a five-session winning streak . Costco stock jumped more than 1.5% as investors were, perhaps, coming around to Jim’s idea that these three retailers are best positioned to mitigate the costs of tariffs and keep prices as low as possible to deliver the value its customers come to expect. “It’s a big mistake to be afraid because you have to put this all relative versus the competition,” Jim said on “Squawk on the Street” on Thursday, while Walmart was near its worst levels of the day. “We are going to be in a position where the only ones that will be able to have scale will be Amazon, Costco, and Walmart.” Like Walmart, Costco will surely face higher costs from tariffs. But Jim thinks they should be pretty manageable. Costco’s U.S. sales are about one-third imports, with less than half of those coming from China, Canada, and Mexico. Costco has also narrow retail margins and plays the volume game. Costco has the added benefit of a steady membership revenue stream to fall back on. To be sure, Walmart has its own membership warehouse Sam’s Club, which performed well in fiscal Q1 with sales of $22.1 billion . But Sam’s Club made up only about 13% of Walmart’s total revenue of $165.6 billion for the quarter. Costco, which reports earnings on May 29, is expected to deliver quarterly sales of $63.1 billion, according to FactSet. Jim suggested that the conversations internally at Costco are probably not about passing on prices to consumers. Rather, they’re likely about how management can leverage its relationships with its vendors and its private label Kirkland Signature brand. Before passing on any prices to the consumer, Costco is known for negotiating with suppliers to cut prices. If suppliers don’t play ball, Jim pointed out that Costco can choose to put more of its private label brand on its shelves instead. This strategy benefits Costco, a leader in private label , because it’s a business area that continues to grow at a faster pace than its business as a whole — a positive for company profitability. That’s important for Costco investors, too, because Kirkland Signature products tend to carry higher margins than name-brand items, and Wall Street wants to see the company become more profitable to help boost earnings. Amazon can pull many of the same levers, including private label, as Walmart and Costco. E-commerce at Amazon pulls in the bulk of the overall company’s revenue, but the Amazon Web Services (AWS) cloud unit accounts for much of the overall profitability. While Amazon does have physical locations through its ownership of Whole Foods, its retail business is mostly online, where Walmart is a formidable competitor. Costco, on the other hand, does not do as much business online, but it has certainly been beefing up its digital operations in recent years. Lastly, all three have strong grocery businesses, which are less exposed to tariffs, offering earnings stability. That’s because grocery is a consumer staples category that customers won’t skip out on like they might do for discretionary purchases like big screen televisions or furniture. The bottom line is that Jim isn’t fazed by Walmart’s “very conservative management team,” and he believes the retailer can “hold the line better than anyone with the possible exception of Costco.” (Jim Cramer’s Charitable Trust is long COST, AMZN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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A view of a Walmart store in San Leandro, California, on April 9, 2025.
Justin Sullivan | Getty Images
Price increases due to tariffs are just weeks away.
Despite that warning from Walmart on Thursday, shares of the retail giant and two others stand the best chance to still thrive in this environment.
