Business

Finally in cross-hairs of Trump's tariffs, U.S. retailers sound alarm

Bloomberg

After surviving a year mostly unscathed in President Donald Trump’s trade war, retailers are finally sounding the alarm bell — and loudly.

Home Depot Inc. estimated Tuesday the hit to product costs could be $1 billion a year. J.C. Penney Co. said further escalation — especially if the latest proposals on apparel and shoes go into effect — would have a “meaningful impact.” Department-store chain Kohl’s Corp. partly blamed an 11 percent cut to its profit outlook on the U.S.’s recent move to raise tariffs on Chinese goods.

The Trump administration avoided most consumer products in the first rounds of tariffs on imports from China, America’s largest trading partner. But that changed in recent weeks, with the administration bumping to 25 percent levies on $200 billion of goods including handbags and furniture, then initiating a separate process to tax another $300 billion, including clothing, shoes and electronics. Companies have been saying a move like that would end up raising prices for consumers, and now chains are telling investors that’s exactly what they’ll do.

Auto-parts seller AutoZone Inc. in its Tuesday call dropped the I-word — inflation — noting that consumers needing new car parts have no choice but to swallow the higher prices that tariffs will bring.

“We are not pleased about the tariffs. We are concerned about what that will do not so much to AutoZone or our business, but more to what it would mean to the U.S. economy,” said Chief Executive Officer William C. Rhodes.

Boot Barn Holdings Inc. gets about half its goods from China and CEO James Conroy says that any price increases can be passed down to consumers. He’s betting that because a lot of its products are workwear items, like flame resistant clothing, shoppers won’t balk at paying more.

“We obviously hope this goes away entirely, but even if we had to pass the entire cost along, I think it’s a relatively modest increase for a product that tends to be non-discretionary,” Conroy said during an earnings call last week.

Escalation of the trade war hasn’t been good for retail stocks. The SPDR S&P Retail ETF has declined 6 percent since Trump called for raising tariffs on May 5. That’s more than double the drop of the S&P 500 Index.

Like every company that sources from China, Home Depot is looking at manufacturing alternatives, finance chief Carol Tome said. The retailer couldn’t say how this latest increase in duties would impact its annual guidance because it came less than two weeks ago.

“There is not a CFO out there who likes change,” Tome said in an interview. But “we have to be agile.”

GET THE BEST OF THE JAPAN TIMES
IN FIVE EASY PIECES WITH TAKE 5