Retail giant Walmart (WMT) has been warned that its hopes of using Indian suppliers to sidestep the impact of U.S. tariffs could be hit by a lack of workers.
Indian Alternative
According to a Reuters report Indian fashion manufacturers are fielding calls from both Walmart and rival Costco (COST) looking for supply chain alternatives to countries such as Bangladesh and China hit hard by President Trump’s tariffs.
Indeed, India, the world’s sixth largest textile and apparel exporter, is expected to be hit with a 26% tariff from July, below the 37% imposed on Bangladesh, 46% on Vietnam and 145% on China – all of which are bigger American suppliers.
However, those Indian manufacturers are warning Walmart and others that a lack of local labor means fulfilling any orders will be challenging.
“We don’t have sufficient labor,” said R.K. Sivasubramaniam, managing director of Raft Garments which supplies underwear and t-shirts priced as low as $1 to U.S. brands.
He and other manufacturers have been relying on skilled migrant labor which is proving both tough to find and retain. That could be even more complicated now given the heightened tensions between nuclear armed rivals India and Pakistan.
Training Push
Prime Minister Narendra Modi, reported Reuters, has for years courted foreign investors to his “Make in India” program to turn the South Asian nation into a global manufacturing hub.
His government last year said it was extending a program to specifically train 300,000 people in textile-related skills, including garment making. It is reported that the sector has a shortfall of 100,000 workers.
Data from shipping consultants Ocean Audit, as highlighted by Reuters, showed Walmart imported 1,100 containers of household goods and clothing between April 2 and May 4 from India, nearly double the same period last year, including cotton shirts and pleated maxi skirts.
Whether that number continues to rise depends on India fixing that worker shortage, what comes out of a prospective U.S. and India trade deal and what direction Trump’s tariff strategy takes next.
Is WMT a Good Stock to Buy Now?
On TipRanks, WMT has a Strong Buy consensus based on 29 Buy and 2 Hold ratings. Its highest price target is $120. WMT stock’s consensus price target is $108.54 implying an 12.14% upside.
