Walmart's (WMT) tariff warning on Thursday could be a red flag for the fortunes of other retailers.

"More discretionary retailers may face a murkier outlook than Walmart," CFRA analyst Arun Sundaram told Yahoo Finance. "Given how fluid the tariff situation is, we may even see some of these retailers pull guidance altogether."

America's largest retailer reported mixed numbers in its first quarter report on Thursday and said tariffs have already led to price increases in April and May. It reiterated its fiscal year guidance and said it expects net sales for the second quarter to increase 3.5% to 4.5%. However, it did not provide guidance for adjusted earnings or operating income for Q2.

"A lot of the price increases that we've talked about with tariffs have not taken effect yet. We'll begin to see some of this as we get into the back half of May ... then also in a more pronounced fashion in June," CFO John David Rainey told Yahoo Finance (video above). Categories most impacted include electronics, toys, vacuum cleaners, baby strollers, and car seats, he said.

Read more: What Trump's tariffs mean for the economy and your wallet

Walmart is sending a warning signal to Wall Street that "the full impact of tariffs probably haven't been actually flowing through the economy yet," Morningstar analyst Noah Rohr told Yahoo Finance.

The recent pullbacks by the Trump administration won't be enough to alleviate the effects. Tariffs on China have dropped from 145% to 30%, while so-called reciprocal tariffs have been suspended for a 10% universal duty, but rates are still much higher than historically.

That could mean 2025, especially the back-to-school season, may not be as strong as retailers had hoped, especially for chains like Best Buy (BBY). About 55% of what Best Buy sells is sourced through China, and another 20% comes from Mexico. Its shares have tanked 15% this year.

Entering 2025, many on the Street were optimistic that Best Buy would be boosted by the replacement cycle kicking in around laptops, notebooks, and phones as AI features ramp up and consumers upgrade after the pandemic spending spree of 2020.

Rohr said it's "probably fair to assume that prices for those electronics and appliances and things will go up and potentially delay the replacement cycle ... that will persist at least in the near term."

In early March when tariffs on China were 20%, Best Buy CEO Corie Barry said on the company's earnings call that if the initial 10% tariff on China were to stay in effect, it would have a "negative impact in the ballpark of 1 point of comparable sales." The second quarter to fourth quarter results would show the brunt of that, she said.

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Parents could also feel the brunt. Rainey pointed out baby strollers and car seats as a category where prices would be increasing. 97% of strollers and 87% of car seats are made in China, per baby registry website Babylist. Newell Brands (NWL), which is behind the Graco brand, is navigating the situation carefully, according to Reuters. Its stock has plunged 40% year to date.

Toy maker Mattel's (MAT) CEO Ynon Kreiz told Yahoo Finance his company will aim to raise prices in the US and move production out of China to other countries with lower tariffs.

As Brian Sozzi reported, the company currently relies on China to produce less than 40% of its toys but also imports from Indonesia, Malaysia, Mexico, and Thailand.

Target (TGT) is also in the hot seat. It imports about half of its US sales, which includes products from China.

"In terms of our owned brand production, we've reduced what we source from China from roughly 60% in 2017 to around 30% today and on our way to less than 25% by the end of next year," Target chief commercial officer Rick Gomez told investors last quarter.

Morningstar's Rohr said the "second and third quarter will be interesting to watch," especially given Target's exposure to highly discretionary items, with the first quarter likely already showing that retail is "under pressure." It stock has dropped 30% in 2025.

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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at [email protected].

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