Navigating Trade Wars: Why Retailers with Pricing Power and Diversified Supply Chains Will Outperform

The global trade war has escalated into a high-stakes game of economic chess, with retailers like Walmart and Mattel vying to protect margins and consumer loyalty amid surging tariffs. For investors, the key to profiting in this environment lies in identifying companies that have already pivoted to domestic sourcing, reduced reliance on tariff-heavy imports, or possess pricing power to offset costs. Let’s dissect how these strategies are reshaping the retail sector—and why now is the time to act.

Walmart: A Model of Resilience Amid Tariff Chaos

Walmart’s Q1 2026 results revealed both vulnerabilities and strengths. While tariffs on Chinese imports (now at 30%) and Latin American goods have forced price hikes on items like bananas (+8%) and car seats (+15%), the company’s aggressive domestic sourcing strategy has insulated its core grocery business. 67% of U.S. sales now come from domestic suppliers, up from 50% in 2020, shielding essentials like dairy and produce from tariff volatility.

Walmart’s omnichannel playbook further buffers its performance. U.S. e-commerce sales grew 21% in Q1, driven by same-day delivery (up 91% year-over-year) and a profitable retail media business (Walmart Connect, up 31%). This hybrid model—combining 10,500 stores as fulfillment hubs—has enabled Walmart to undercut Amazon’s delivery reach while maintaining affordability.

Investment Case: Walmart’s 17.3x EV/EBITDA multiple remains undervalued relative to Amazon’s 24.5x. Its $2.3 billion acquisition of Vizio signals a tech-driven future, while its ability to grow e-commerce profitability amid tariffs positions it as a “buy-and-hold” core holding.

Mattel: A Toy Giant’s Playbook for Tariff Survival

The toy sector faces existential threats as tariffs on Chinese imports (80% of U.S. toys) threaten to erase margins. Mattel’s response? A radical reshaping of its supply chain. The company aims to slash Chinese production to under 15% by 2027, relocating 500 toys out of China in 2025 alone. New hubs in Indonesia, Mexico, and Thailand now account for 60% of its production, reducing exposure to punitive tariffs.

CEO Ynon Kreiz’s “Optimizing for Profitable Growth” program has already saved $83 million. By prioritizing affordability—keeping 40–50% of toys priced at $20 or less—and leveraging brands like Barbie and Hot Wheels, Mattel is carving out a defensible niche. Its 2% Q1 sales growth despite 30% tariff costs proves the strategy works.

Investment Case: Mattel’s 32.7% upside potential to $21.50 reflects its structural advantages. As smaller rivals fold under tariff pressure, Mattel’s diversified supply chain and brand power could cement its position as the sector’s low-cost leader.

Consumer Spending: A Shift Toward Essentials and Value

The data paints a clear picture: consumers are prioritizing affordability and speed.

• Groceries and Staples Win: Walmart’s 4.5% U.S. grocery sales growth contrasts starkly with declines in discretionary categories like electronics (-2.5%). Shoppers are trading up on basics (e.g., dairy, pantry staples) while delaying non-essential purchases.
• E-Commerce Dominance: Same-day delivery adoption rose 6% year-over-year, as consumers demand instant gratification without premium pricing.
• Tariff-Induced Volatility: While March 2025 saw a 1.7% retail surge as shoppers stockpiled pre-tariff goods, April’s 0.1% growth signals caution.

The Winning Formula: Domestically Sourced, Price-Resilient Retailers

Investors should focus on three traits:

1. Low Import Dependency: Companies like Walmart (67% domestic sourcing) and Target (33% imports) face less tariff exposure than Amazon (45% imports).
2. Pricing Power: Premium brands like Mattel and L Brands (owner of Victoria’s Secret) can pass costs to consumers without losing sales.
3. Cost Discipline: Walmart’s 30% efficiency gains in e-commerce fulfillment and Mattel’s $83 million savings highlight operational rigor.

Final Take: Act Now Before Tariffs Rise Again

The next 12 months will test retailers’ adaptability. With tariffs on 104% of Chinese goods and 46% of Vietnamese imports still looming, companies lacking domestic sourcing or pricing agility will struggle.

Walmart and Mattel, however, have already navigated the storm. Their stocks offer asymmetric upside: Walmart’s 24% upside to $120 and Mattel’s 33% potential to $21.50 reflect their structural advantages.

The trade war isn’t ending anytime soon. Investors who back retailers with diversified supply chains and pricing power will emerge winners. The clock is ticking—act now.