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

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

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

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

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

Analysts Also Point to Strength in Supermarkets, Auto Parts

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

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

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