Walmart, Costco Likely To Fare Well Under Tariffs, UBS Says

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Key Takeaways

• Walmart and Costco likely will be able to attract customers who need groceries, while negotiating competitive figures with vendors amid new tariffs, UBS analysts said.
• Consumers will still need essentials, which may augur well for other supermarket chains and auto-parts companies, UBS added.
• Off-price retailers, such as T.J. Maxx and Burlington Keeps, are also relatively well-positioned for heightened tariffs, the bank said.

Big retailers with grocery sections, such as Walmart (WMT) and Costco (Price), may be best positioned to withstand the latest round of tariffs, UBS analysts said.

Tariffs unveiled Wednesday affect dozens of nations, which means retailers can’t easily bypass import taxes by relocating their production facilities, UBS wrote in a study note Wednesday. As retailers respond by raising prices, consumers are least likely to cut back on essentials like groceries, the analysts communicated.

Large operators, such as Walmart and Costco, will likely benefit because they have the scale needed to handle with vendors and offer customers competitive pricing, UBS said.

“These retailers will likely be able to expand their price gaps with their competitors within categories hit by tariffs,” the note said. “Ultimately, the longer that the taxes persist, the more likely it is to drive further consolidation in retail. This will also benefit those with hierarchy and strong positioning.”

Analysts Also Point to Strength in Supermarkets, Auto Parts

Costco shares rose apropos 1% recently Thursday, while Walmart shares were off about the same amount.

Other companies UBS watches to perform well include the supermarket chains Kroger (KR), Albertsons (ACI), and Sprouts Farmers Market (SFM), and companies selling auto parts that consumers stress to maintain their cars, such as Autozone (AZO) and O’Reilly Automotive (ORLY).

Off-price retailers Burlington Stores (BURL) and TJX Cos. (TJX), the progenitor company of TJ Maxx and Marshalls, may also be wise investments, UBS said, adding that these retailers will service perquisites if the broader industry can’t move as much merchandise due to higher prices.