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Walmart's Exposure To China 'Overestimated', Ex-Exec Says

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Walmart's Exposure To China 'Overestimated', Ex-Exec Says

The coronavirus and its impact on American companies was made clear in Apple Inc.'s (NASDAQ: AAPL) revenue warning but what's less clear is the impact to retailers like Walmart Inc (NYSE: WMT). According to Bill Simon, former president and CEO of Walmart U.S., the company's dependence on China is "overestimated by many."

What Happened

Walmart disclosed a few years ago that two-thirds of all items sold in its stores are either "made or grown" in the U.S., Simon said on CNBC Tuesday morning. At that time, Chinese suppliers accounted for 20% of the remaining one-third of the products sold.

After a few years of trade tension and tariffs, Walmart and many other companies made arrangements for alternate supply lines so its exposure to China could be lower today.

See Also: Walmart Posts Q4 Earnings Miss, Says Disruption In Chile Dented Operating Income By $110M

Why It's Important

One of the units Walmart focused on growing outside of China includes apparel which is a "big piece" of Walmart's overall business and a big margin driver. But it isn't large in terms of volume so Walmart and others have succeeded in finding alternative makers to avoid potentially "harmful" tariffs.

The toy segment relies on China, but the segment is showing flat growth at best.

What's Next

The coronavirus at this point shouldn't have any sort of "significant impact" to Walmart's operations and business moving forward.

"I think the exposure to China for Walmart has been overblown," Simon said.

Photo credit: MikeMozartJeepersMedia, via Wikimedia Commons

 

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