Walmart's warning of higher prices puts spotlight on ‘RIM accounting' practice favored by big retailers
Retail giant Walmart is known for low prices, but those prices are about to go up. On its latest earnings call, CEO Doug McMillon and CFO John David Rainey warned that the company cannot absorb all the cost increases resulting from President Trump's tariffs, even after some rates were reduced following negotiations. The executives said Walmart will begin raising prices on certain products as early as the end of May, with more noticeable increases expected in June.
'The level of tariffs that result from those discussions and the timing of when they ultimately become final may cause larger swings in our financial performance from one quarter to the next,' Rainey said on the May 15 call.
The veteran CFO also gave a brief lesson on Walmart's method of accounting for the cost of inventory for the majority of its U.S. business. Known as the retail inventory method, or RIM, this practice makes these swings more difficult to forecast.
'We've always used RIM in Walmart U.S.,' Rainey said. 'It's not new for us, and it's a common method of accounting in the retail industry.' RIM accounting applies a ratio of the actual cost of the inventory to its retail price to calculate ending inventory and, therefore, derive cost of goods sold, he said.
Rising prices can lead to higher inventory markups and increased margins, but later markdowns may offset these gains, Rainey explained. The resulting fluctuations in costs are unprecedented for Walmart and could cause significant swings in quarterly margins and earnings, he said.
According to Sang Hyun 'Sam' Park, an associate professor at Augusta University's Hull College of Business, U.S. GAAP gives retailers two main ways to price inventory at period-end: the use of RIM or tracking every SKU's exact cost.
Walmart isn't the only big box retailer to use RIM, which means the implications of see-saw tariffs on this accounting method may be wide-reaching.
RIM is popular at chains that sell millions of low-ticket items, like Walmart, Target, and Home Depot, because management already knows each product's shelf price but not its precise landed cost until weeks later, Park told Fortune.
'By applying a single 'cost-to-retail' percentage to the ticket price, the accountant can finish the books quickly without scanning every purchase order,' Park explained.
Modern enterprise resource planning (ERP) systems, which automate core processes such as accounting, can handle item-level data, he said. 'But for high-volume, low-margin general merchandise, the faster, cheaper RIM shortcut still wins,' Park said.
He further explained how RIM is affected by tariffs. Landed cost is the all-in amount it takes to bring goods to the shelf: a total of supplier invoice, freight, insurance, import duty (tariff), and brokerage fees. Under RIM, that amount feeds the 'cost' side of the cost-to-retail ratio. Tariffs wind up squeezing the margin.
'Tariffs inflate landed cost, nudging the cost-to-retail ratio higher,' Park said of Walmart's situation. 'A quick shelf-price hike can mask that hit for a while, but markdowns later force the higher cost back into earnings.'
During the earnings call, Rainey also said he is concerned about the possibility of LIFO-related charges as prices go up. LIFO, short for Last-In, First-Out, is an inventory accounting method where the most recently purchased or produced goods are assumed to be sold first.
To address these accounting challenges, Park foresees Rainey using a new playbook when it comes to data granularity, scenario planning, and governance—but not an accounting policy overhaul.
'What Walmart's CFO hints at is the need for supplementary tools,' he said. That includes more frequent recalibration of cost complements, layered RIM pools (such as separating tariff-sensitive imports), richer disclosure, and tighter forecasting analytics.
For the first quarter, Walmart's revenue increased 2.5% year over year to $165.6 billion, U.S. same-store sales increased 4.5%, and its e-commerce business reached profitability for the first time.
This story was originally featured on Fortune.com
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
2 hours ago
- Yahoo
Circle Internet (CRCL) Soars 80% W/W as Analyst Recommends to 'Buy' Its Stock
Circle Internet Group (NYSE:CRCL) is one of the . Circle Internet skyrocketed by 80 percent week-on-week, closing at $240.28 versus the $133.56 on June 13, with investor sentiment bolstered by a flurry of catalysts, including a 'buy' recommendation and growth opportunities from the Senate's passage of the Stablecoin bill. On Friday, Circle Internet Group (NYSE:CRCL) earned its first 'buy' recommendation from Seaport Global following the Senate's passage of a legislation that would allow the wider usage of Stablecoin. Earlier last week, Circle Internet Group's (NYSE:CRCL) announced that its USDC Stablecoin is being adopted by retail giants Amazon and Walmart, as well as e-commerce operator Shopify, which began rolling out its feature enabling merchants to accept the digital currency for payments and order fulfillment flows. A man and a woman in matching suits with a a digital tablet highlighting a payment solution. Circle Internet Group (NYSE:CRCL) also said that it partnered with blockchain firm Ripple to bring USDC Stablecoin to the latter's XRP Ledger blockchain, as well as with digital identity company World for the addition of USDC and CCTP V2 (Cross-Chain Transfer Protocol) on World Chain. While we acknowledge the potential of CRCL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock. READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires. Disclosure: None. This article is originally published at Insider Monkey. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Engadget
6 hours ago
- Engadget
How to buy the Nintendo Switch 2: Latest stock updates at Target, Best Buy, Walmart and more
The Nintendo Switch 2 has been available in the US for more than two weeks — but good luck finding one. While millions of people have been able to snag the $450 console since it officially went up for sale on June 5, online inventory dried up fairly quickly at most stores soon after launch and remains difficult to find today. Target and Best Buy restocked shortly after launch, but those didn't last long, and the latter required in-store pickup. You may also be able to grab a bundle at Costco if you're a member there. Otherwise, it's been slim pickings. As of today, we're not seeing any availability — though you may have different luck in your locality when checking inventory, online or in person. To that latter point, people had a bit more luck on launch week by venturing to a physical retail store. We can't guarantee you'll still be able to snag a Switch 2 the old-fashioned way, but it's worth checking if a local Target, Best Buy, Walmart or GameStop — the four official retailers Nintendo lists on its store page — still has consoles in stock. For now, you can skip Amazon, though: For whatever reason, the biggest online retailer doesn't even have a product page for the Switch 2 (but it does seem to be selling games and accessories). All that said, if you're still on the hunt, we've rounded up all of the latest information we could find on how to buy the Nintendo Switch 2 and where you can pick one up. Walmart began online purchases at midnight ET on June 5. Currently, both the Mario Kart World bundle and the standalone console are "available" via third-party retailers, but listed for much higher than their standard $500 and $450 price tags — with limited quantities available. We wouldn't recommend buying these; instead, wait for the console to be listed at its regular MSRP. Naturally, the world's largest retailer is also selling the console at its brick-and-mortar locations, though the company has noted that quantities are limited and inventory will vary by location. Best Buy started selling the Switch 2 at its retail locations on June 5. It previously said it wouldn't sell the handheld at its online store during launch week, but it made additional consoles available on June 11 around 12PM ET. That restock lasted for the better part of an hour and required in-store pickup, but the device is now sold out again. Target had the Switch 2 in stores on June 5 and restocked its online inventory for at least a couple of hours starting around 3:30AM ET on June 6. It then had another restock on June 12 around 2:30PM ET, but that appears to have died out in less than an hour. It still looks to be fully sold out as we write this, but you should see if there's any stock at the stores closest to you just to be safe. GameStop has advertised in-store availability, though exactly how much stock your local store may have will vary by location. Online, the device has been unavailable for the past week, with the listings for the base console and Mario Kart bundle now pointing to a "Find a Store" page. We saw a $625 bundle that includes Mario Kart World , a microSD Express card and a few other accessories pop up a bit more frequently than the standard SKUs, but it's no longer listed (and it was kind of a raw deal anyway). You may still have some luck at certain membership-based retailers. A Mario Kart World bundle at Costco that includes a 12-month Switch Online subscription has gone in and out of stock since launch day. Sam's Club has had a bundle without the Switch Online sub as well, though it's out of stock now. We also saw the console at BJ's early on June 5, but it's no longer live there. Verizon briefly had the Switch 2 available on launch day, but that's dried up, and only those with Verizon service were able to order. Amazon hasn't had any form of Switch 2 listing on its website, nor has it listed Mario Kart World . The company didn't take pre-orders for the Switch 2 either, so it's unclear if and when it will sell the device. You can, however, find some Switch 2 games. Newegg has listed the Switch 2 on its site for several weeks, but it's given no indication as to when it'll begin sales. It previous showed a couple listings from a third-party seller, but at massively inflated prices. With all of these stores, we've seen the Mario Kart World bundle available in greater quantities online than the base console, which costs $50 less. But given that Mario Kart is the Switch 2's biggest launch game and retails for $80 on its own, that may not be the worst thing. Nintendo, meanwhile, is only offering the Switch 2 via an invite system. This requires you to have been a Switch Online member for at least 12 months and logged at least 50 hours of Switch 1 playtime as of April 2. It can't hurt to sign up if you meet the criteria, but don't expect it to bear fruit immediately — it's taken weeks for many people who registered in April to receive their invite. You can find a list of every Switch 2 retail listing we could find below. Just be aware that this is meant to be a reference, not a rundown of everywhere the device is available right this second. Where to buy Switch 2 + Mario Kart World bundle: Where to buy Switch 2: Nintendo is selling a number of Switch 2 accessories alongside the console, from its (pricey) Pro Controller to cases to cameras for the new GameChat feature. Most of these became available on June 5. The same goes for games like Mario Kart World and the Switch 2 version of The Legend of Zelda: Tears of the Kingdom . Another big Switch 2 release, Donkey Kong Bananza , won't be available until mid-July but is still up for pre-order now. As of this publication, just about all Switch 2 games are broadly available. Stock for the accessories remains a little spottier, but most devices are still available at multiple retailers. Nintendo's official Switch 2 carrying cases have been the main exceptions, so you may need to look to third-party alternatives if you want some protection for your console right away. Mario Kart World ($80) Nintendo Walmart GameStop Best Buy Target Donkey Kong Bananza ($70) Nintendo Amazon Walmart GameStop Best Buy Target Costco (membership required) Additional Switch 2 games Nintendo Amazon Walmart GameStop Best Buy Target Samsung microSD Express Card (256GB) for Nintendo Switch 2 ($60) Nintendo Walmart GameStop Best Buy Target Amazon Joy-Con 2 bundle ($95) Nintendo Walmart GameStop Best Buy Target Switch 2 Pro Controller ($85) Switch 2 Camera ($55) Nintendo Walmart GameStop Best Buy Target Hori Nintendo Switch 2 Piranha Plant Camera ($60) Joy-Con 2 Charging Grip ($40) Nintendo Walmart GameStop Best Buy Target Joy-Con 2 Wheels (set of 2) ($25) Nintendo Walmart GameStop Best Buy Target Switch 2 All-in-One Carrying Case ($85) Nintendo Walmart GameStop Best Buy Target Switch 2 Carrying Case and Screen Protector ($40) Nintendo (invite required) Walmart GameStop Best Buy Target Nintendo Switch 2 Dock Set ($120) Nintendo GameCube Controller for Switch 2 ($65) Nintendo (Switch Online required)
Yahoo
9 hours ago
- Yahoo
This Walmart Store Has Seen a ‘Huge' Decrease in Shoplifting After Making 1 Major Change
A Walmart in Missouri has seen a significant reduction in shoplifting since removing self-checkout lanes in April 2024 Local police state that calls and arrests to the supercenter have decreased by over half in a year-over-year comparison In an email to PEOPLE, Walmart stated that it currently does not have plans to remove self-checkout options in any other storesA Walmart in Missouri has dealt with significantly less crime after tearing out its self-checkout lanes. In a recent presentation to city officials, Shrewsbury Police Chief Lisa Vargas stated that police calls and arrests at a local Walmart supercenter were down by over half when compared to the same period in the previous year, per local news outlet the Webster-Kirkwood Times. Walmart removed the self-checkout option at the Shrewsbury location in April 2024. Prior to the change, many people were checking themselves out and not paying for items, per the outlet. Vargas stated that in January through May 2024, the Shrewsbury Police Department responded to 1,915 calls — over 25% of which came from the local Walmart. In the same period in 2025, only 11% of calls were regarding issues from the store, per the Times. 'That's a huge change. We really appreciate Walmart taking initiative and removing those self-checkers,' Vargas said during her presentation, per the outlet. PEOPLE reached out to the Shrewsbury Police for comment on Friday, June 20, but did not receive an immediate response. 'We're always looking for ways to innovate in our stores, including the checkout experience,' Charles Crowson, Walmart's Director of Global Affairs, said in an email to PEOPLE. 'Any adjustments are based on varying factors, including feedback from associates and customers, shopping patterns and business needs in the area,' he continued, adding that Walmart does not have plans to remove self-checkouts from other locations. This isn't the first time that Walmart has implemented changes in an effort to prevent shoplifting. In 2024, the retailer introduced handheld scanners at select locations, which enabled employees to ensure that shoppers were not using old or fake receipts to walk out of stores with unpaid items. Never miss a story — sign up for to stay up-to-date on the best of what PEOPLE has to offer, from celebrity news to compelling human interest stories. The chain also has been making changes to combat card skimming, which is a tactic used by thieves to steal credit card information by installing official-looking devices over the existing devices at self-checkout stations, per ABC affiliate WSET. Read the original article on People
