Strong Dollar: Impact on Retail Giants

Impact on Revenue and Profit Margins

Retail giants are experiencing varied impacts on revenue and profit margins due to a strong dollar. Amazon saw a 13% revenue increase excluding foreign exchange effects. Walmart and Costco are adjusting pricing strategies to manage cost increases, affecting gross margins. Lowe's improved operating margins despite lower sales, while Home Depot expects a 50 basis point gross margin increase.

"Worldwide revenue was $143.3 billion, representing a 13% increase year-over-year, excluding the impact of foreign exchange and near the top end of our guidance range." --- (AMZN, earning call, 2024/Q1)

"The impact to our net sales and gross profit margin is influenced in part by our pricing and merchandising strategies in response to cost increases." --- (WMT, sec filing, 2025/Q1)

"Our investments in merchandise pricing may include reducing prices on merchandise to drive sales or meet competition and holding prices steady despite cost increases instead of passing the increases on to our members, negatively impacting gross margin and gross margin in the near term as a percentage of net sales (gross margin percentage)." --- (COST, sec filing, 2024/Q3)

"Total sales of $86,400,000,000 were down 4.7% on a comparable basis. And we offset pressure from lower sales through rigorous expense management and our perpetual productivity improvement or PPI initiatives. This helped us deliver an adjusted operating margin of 13.3%, a 30 basis point improvement over 2022." --- (LOW, event transcript, 2024/05/31)

"Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points, compared to fiscal 2023." --- (HD, earning call, 2024/Q1)

Effect on International Sales

Retail giants like Walmart and Amazon have experienced minor changes in international sales due to currency fluctuations, with Amazon detailing specific impacts on net sales and operating income. Costco also acknowledges exchange rates as a risk, though it excludes these impacts in comparable sales metrics.

"These risks and uncertainties include, but are not limited to, domestic and international economic conditions, including exchange rates, inflation or deflation, the effects of competition and regulation, uncertainties in the financial markets, consumer and small business spending patterns and debt levels, breaches of security or privacy of" --- (COST, sec filing, 2024/Q3)

"Each, however, has generally maintained a relatively consistent contribution rate to the Company's net sales and operating income in recent years other than minor changes to the contribution rate for the Walmart International segment due to fluctuations in currency exchange rates." --- (WMT, sec filing, 2025/Q1)

"The effect on our net sales, operating expenses, and operating income from changes in our foreign exchange rates versus the U.S. Dollar is as follows (in millions):   Three Months Ended March 31, 2023 2024 As Reported Exchange Rate Effect (1) At Prior Year Rates (2) As Reported Exchange Rate Effect (1) At Prior Year Rates (2) Net sales $ 127,358 $ 2,436 $ 129,794 $ 143,313 $ 164 $ 143,477 Operating expenses 122,584 2,575 125,159 128,006 236 128,242 Operating income 4,774 (139) 4,635 15,307 (72) 15,235" --- (AMZN, sec filing, 2024/Q1)

"Comparable sales and comparable sales excluding impacts from changes in gasoline prices and foreign exchange are intended as supplemental information and are not a substitute for net sales presented in accordance with U.S. GAAP." --- (COST, press release, 2024/05/30)

"For marketplace, within international, all markets grew double-digits, led by Flipkart and Walmex, reflecting the strength we're experiencing across markets." --- (WMT, earning call, 2025/Q1)

Influence on Supply Chain Costs

Retail giants are mitigating supply chain costs influenced by a strong dollar through higher sales volumes, optimized fulfillment networks, and better supplier terms (AMZN). They are also capturing cost decreases to pass on value (COST), managing transportation costs effectively (HD), and investing in supply chain improvements despite credit pressures (LOW).

"We seek to mitigate costs of shipping over time in part through achieving higher sales volumes, optimizing our fulfillment network, negotiating better terms with our suppliers, and achieving better operating efficiencies." --- (AMZN, sec filing, 2024/Q1)

"In that vein, our buying teams are constantly aware of changing costs across all of their SKUs and are ensuring that we are capturing all cost decreases quickly so that we can pass on incremental value through price reductions." --- (COST, earning call, 2024/Q3)

"Brandon Sink: I won't put a specific number on Q2, but we do expect Q2 to be similarly pressured with supply chain investments and some of the credit pressure that we're continuing to see." --- (LOW, earning call, 2025/Q1)

"Richard McPhail: I think, we’re – so we’re executing on all cylinders. And from a transportation perspective, from the merchants managing retail and costs through one of the most volatile periods last year in our history, fantastic results." --- (HD, earning call, 2024/Q1)

"Part of what we did with our change in seller fees, we lowered the outbound fees in a meaningful way, but then we added an incentive for our sellers to inbound into locations that allow us to be more cost following and allow both our sellers and us to enjoy in those cost savings when we're able to do so. And we're seeing" --- (AMZN, earning call, 2024/Q1)

Adjustments in Pricing Strategies

Retail giants like Costco, Target, Lowe's, Walmart, and Amazon are adjusting their pricing strategies in response to a strong dollar by leveraging data, AI tools, and tactical pricing methods. These adjustments include increasing private-label items, lowering prices, building pricing infrastructure, testing rollbacks, and utilizing dynamic pricing insights.

"successful historically in adapting our business to these changes, such as through adjustments to our pricing and merchandise mix, including increasing the penetration of our private-label items, and through online offerings." --- (COST, sec filing, 2024/Q3)

"Looking ahead, our team will deliver for our guests through lower prices, a seasonally relevant assortment, ease and convenience, as we keep investing in our strategy and efficiency initiatives to get back to growth and deliver on our longer-term financial goals. Guidance For the second quarter, the Company expects a 0 to 2 percent increase in its comparable sales, and GAAP and Adjusted EPS of $1.95 to $2.35." --- (TGT, press release, 2024/05/22)

"And so the best way for me to answer your question is that we believe today that we have the brand portfolio on the pro and the DIY side that gives us the ability to compete you know with with any competitor effectively And now what we're doing is we're building that pricing infrastructure and we're leveraging your modern data so that we can make sure that we're priced right and we're priced competitively so we could win, but we can also continue to bring value to the bottom line. Very helpful. So as our time starts to wind down here, I did" --- (LOW, conference, 2024/06/26)

"And this can be a tactical pricing strategy for us where we have the opportunity to go in and see how customers respond to these rollbacks before we make a permanent price change." --- (WMT, conference, 2024/06/12)

"AI-powered pricing tools provide dynamic pricing insights, while recent innovations include generating rich Premium A+ Content and augmented reality visualizations." --- (AMZN, press release, 2024/06/21)

Impact on Competitive Positioning

Retail giants like Costco, Walmart, and Lowe's emphasize their ability to maintain competitive pricing and leverage data to stay ahead. They see opportunities to be more competitive and are confident in their pricing strategies, ensuring they provide value to customers despite currency fluctuations.

"Ron Vachris: It moves as time moves and you see pricing in categories and where we have the greatest opportunity to be more competitive for our members." --- (COST, earning call, 2024/Q3)

"So overall, what is your team seeing on the competitive and promotional fronts here in the U. S? And then how do you feel about your pricing position and" --- (WMT, conference, 2024/06/11)

"We feel good about our ability to price competitively on key commodity products." --- (LOW, conference, 2024/06/26)

"So any color on what you're seeing competitively? Ron Vachris: Yes. There'll be ebbs and flows with the competition, but I'm very confident that we are always in the right position and we're staying ahead of that to keep the value there for our members." --- (COST, earning call, 2024/Q3)

"It is a competitive advantage. It's true for all companies. And I guess, what are your are you best placed to win when it comes to using data and the scale that you have and all the data that you have?" --- (WMT, conference, 2024/06/12)

Impact on Consumer Behavior

Higher prices, driven by a strong dollar, are leading consumers to be more value-conscious, resulting in soft trends in discretionary spending. Retail giants like Target, Home Depot, Lowe's, Costco, and Walmart report that consumers are prioritizing value and innovation, indicating a shift in shopping behaviors.

"This normalization, combined with the cumulative impact of higher prices on consumer budgets, is resulting in continued soft trends in discretionary categories, most notably in Home and Hardlines." --- (TGT, earning call, 2025/Q1)

"If you look across different companies with the consumer, there's varying feedback on green shoots and some COVID winning categories, low end consumer weakness, shopping around occasions." --- (HD, conference, 2024/04/04)

"And that's really the difference that's going on today. You've got a value-conscious consumer that is opting in and you've got a consumer that's not afraid to pay for innovation when that's offered to her as well. So we want to make sure that we meet or where she wants to be met." --- (LOW, earning call, 2025/Q1)

"So we're seeing that benefit from both sides of the consumer that great value in both areas are doing very well." --- (COST, earning call, 2024/Q3)

"We hear that from our customers. We see it in their behavior. Certainly, customers are looking for value during higher prices or with higher prices." --- (WMT, conference, 2024/06/25)

Future Outlook and Strategies

Retail giants like Walmart, Target, Lowe's, and Costco are focusing on personalized consumer engagement, operational performance, theft prevention, and expanding member value to drive future growth. These strategies aim to enhance customer experiences and operational efficiency, ensuring resilience and competitiveness in a strong dollar environment.

""Our approach goes beyond traditional focus groups and surveys, with true engagement that will shape the future of retail by creating more personalized experiences for our members."" --- (WMT, press release, 2024/06/06)

"The principal forward-looking statements in this report include statements regarding: our future financial and operational performance, the adequacy of and costs associated with our sources of liquidity, the funding of debt maturities, the execution of our share repurchase program, our expected capital expenditures and new lease commitments, the expected compliance with debt covenants, the expected impact of new accounting pronouncements, our intentions regarding future dividends, the expected return on plan assets, the expected outcome of, and adequacy of our reserves for, claims, litigation, and the resolution of tax matters, and changes in our assumptions and expectations." --- (TGT, sec filing, 2024/Q1)

"This remains an ongoing issue for Lowe's and other retailers, and we believe that organized retail theft will be a problem for us for the foreseeable future, but I'm really confident that we have the correct process and strategies in place to remain best in class in retail." --- (LOW, event transcript, 2024/05/31)

"I mean, we really do indeed see that. I think especially with our limited SKU count in the warehouse, how can we expand the offering to the members, bring value to their membership card beyond what's within our four walls or what's on costco.com and we see this as a great growth driver for us in the future and a way to bring expanded value to the members as we look forward." --- (COST, earning call, 2024/Q3)

"We feel like we're we have the right strategy. We've had that feeling for some time and hopefully in the most recent quarter and quarters, you've seen that we're executing on that." --- (WMT, status update, 2024/06/07)