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April 9, 2025
Which Retailers Are Best Positioned To Withstand Tariffs?
Wholesale clubs, grocers, off-pricers, and certain big-box chains are seen as the early favorites among retailers to withstand the Trump administration’s tariff hits.
Off-price stores tend to buy out-of-season products from other retailers rather than import most of their merchandise themselves, which could reduce their tariff exposure. Plus, with apparel and footwear prices set to rise, full-price retailers will likely sell less clothing and shoes, opening up more opportunistic buys for off-pricers.
“Companies may have to either cancel orders or clear excess inventory in some other way,” UBS analyst Jay Sole wrote in a note last week recommending the purchase of TJX and Burlington stocks. “Off-price retailers like TJX and BURL typically outperform in times of dislocation.”
“Tariffs are likely to create significant disruption in the mkt, greatly increasing the availability of product available to off-pricers at attractive prices,” Citi analyst Paul Lejuez said in a note upgrading TJX and Ross Stores. “At the same time, a potentially weakening consumer environment will mean more consumers are likely to trade down to the off-price channel in search of value and the treasure hunt shopping experience.”
Lejuez further noted that store closures have benefitted off-pricers over the past five years, and “the momentum may even increase if the current environment accelerates closures across the retail sector.”
A Modern Retail article noted that online resale platforms such as ThredUp and handicraft marketplace Etsy will likewise benefit from little exposure to imports.
Grocers and big-box chains with a major food exposure are also seen as more tariff-immune because consumers are expected to favor nondiscretionary purchases should economic concerns continue.
Grocers also tend to import less from Asia than other retail channels. Despite significant amounts of produce from Mexico and Canada, the two countries weren’t included in Trump’s latest tariff announcement, as they’re subject to their own 25% tariffs. Goods compliant with the USMCA trade agreement are also exempt.
In reiterating his favorable ratings on Walmart, Costco, Kroger, and Albertsons, UBS analyst Michael Lasser wrote last week in a note shared by Yahoo! Finance, “A greater amount of exposure to consumables products will see more earnings resiliency, especially grocers, given the vast majority of these products are sourced domestically.”
On Costco’s earnings call in March, CEO Ron Vachris said that only one-third of its sales in the U.S. are imported from other countries, with less than half coming from China, Mexico, and Canada. Vachris said, “In uncertain times, our members have historically placed even greater importance on the value of high-quality items at great prices.”
Several articles in recent days have warned that there will likely be price hikes in heavily imported food categories, including fresh fruits and vegetables, coffee, seafood, olive oil, and chocolate.
Discussion Questions
Which retail channels or retailers do you see as best positioned to weather the trade war?
Are any retailers likely beneficiaries?
Poll
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Mark Ryski
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The answer really depends on what happens with tariffs – and that seems to change by the hour! However, in terms of the higher import costs, both off-price and resale are better placed to avoid these. Bigger players, like Walmart, have more negotiating power and more levers to pull to find cost savings. However, if tariffs are broad brush (as they previously were) then no company can completely avoid them. Not even off-price. Why? Because virtually every business will have something – plant, packaging, transportation, uniforms, store construction, lighting – that relies on imports. And the costs for these things will rise.
I think the answer was pretty much covered – at least to the extent that one can predict accurately when the inputs (to the equation) seem to be dependent on what amounts to random chance.
But let’s look at it in the other direction – who is least able to deal with it? – because I think that’s a lot more certain: either smaller companies with fewer resources, or larger companies that were already stressed; I’m not going to name names, but pretty much anyone who’s appeared on RW in the past year or two with the telltale phrase “turnaround” attached to them.
As noted, off-pricers and grocery retailers are in the best position to weather the tariffs because of the non-discretionary nature of their offerings. Size also matters, since the largest retailers have the ability to absorb some of the price impact that the tariffs – if/when implemented – will most certainly have. Beneficiaries? If broad tariffs across virtually all categories are implemented, overall consumer demand will fall and that will impact everyone. I doubt that there will be any really big winners here, but there will be players who are less impacted than others, and most are mentioned in the article.
Definitely off-prices because they buy so much landed, vs. grocers, who deal with not just imported product, but also migrant workers
As far as I am concerned, the tariff situation does not constitute a “trade war” because the U.S. has been paying tariffs to a large number of foreign countries for decades and just now is asking for reciprocity.
Currently, it appears that most countries intend to comply with President Trump, either by dropping current tariffs or by negotiating the amount. There may be a trade “war” between the United States and China.
However, let’s consider some realities. It is likely that brick-and-mortar retailers will face challenges due to increased tariffs and supply chain disruptions.
Online retailers, on the other hand, are often more resilient due to their ability to source products from diverse locations and make use of efficient logistics networks.
E-commerce platforms can also benefit from data analytics by better understanding consumer demand and adjusting their strategies accordingly.
In the event that huge retailers with established global supply chains are subject to tariffs, they may have the resources to absorb the additional costs or shift production to other countries, potentially benefiting from tariffs by squeezing out smaller competitors.
Small retailers, on the other hand, may have difficulty adjusting to higher costs and supply chain disruptions, making it difficult to compete with larger companies. This can result in tariffs inadvertently giving an advantage to large retailers that are better equipped to address these challenges.
I am going to push back a bit. He’s been talking tariffs for years. Retailers have had a lot of time to prepare and be proactive. If retailers are just now looking for options-both in procuring other assortments and/or looking at supply chain options , they are late to the party. Never get caught with your hand showing.
That was not a request for reciprocity. It could have been, but it wasn’t…not even close. It was a premeditated tantrum, designed for maximum chaos. Mission accomplished. And if they didn’t expect chaos, that might be even scarier. Yeah, small retailers may indeed have difficulty. Ya think? And tariffs do not ‘inadvertently’ give large retailers an advantage. They inherently give them an advantage, especially when imposed overnight and in massive amounts. So what’s worse. That this chaos was created on purpose, or by accident…???
Luxury brands, high-end lifestyle brands… their customers are the best positioned to absorb price increases and treat them as an inconvenience. Grocery will be OK; people have to buy food. I expect Aldi and Walmart to continue to do well, albeit with thinner margins. I suspect that Walmart will increase market share from their competition as middle-class customers trade down to try to absorb a new and massive tax bill on top of inflation and as they watch their retirement savings vanish. Even if we’re just talking about paper losses, the idea that we’re not as well off as we used to be six months ago will incentivize some consumers to rethink where they get their basics.
As I write, we have to wonder if, when, and what countries will have tariffs. The uncertainty has certainly caused havoc in the market, caused retailers to quickly adjust their plans, and caused consumers to panic.
Any retailer that focuses on “Made in the USA” merchandise or any retailer sourcing from inside the country will feel a less negative impact than others. Even if their merchandise is exempt from tariffs, that doesn’t mean the source isn’t impacted and passing price increases through to retailers.
And to emphasize, even though we are all adjusting and planning, the uncertainty of how this story ends is unknown at this time.
Size and scale matter, giving Amazon and Walmart negotiating power. High-margin B2B revenue streams like retail media and logistics services will also cushion these retail leaders in a trade war. Consumers will seek cost savings, especially for essentials, giving Aldi and TJX an edge, too.
Managing any retail operation in today’s environment is certainly not for the faint of heart. Perhaps the larger, diversified retailers will weather the storm a bit better than smaller, heavily trade-reliant retailers. However, all will be affected to some degree (and, of course, that all depends on where the final tariff negotiations net out). The good news is that many retailers modified their supply chain practices as a result of Covid. To a large degree, this is similar. Resilient retailers will put into action plans that should have been developed long before the trade wars were initiated. For those that are caught flat-footed, regardless of size, they will be more adversely affected.
While obviously retailers who have dibbs on value priced products from lower tarriff sources have a leg up, it’s going to come down to who sells essential goods and services and who does not. When times are tough it’s the discretionary spending that stops, regardless of how cheaply it’s sourced or how low it’s priced. Consumers will be holding on to their existing phones, passing on that larger TV and keeping their old cars, old clothes and old appliances a little longer. And when need arises, used goods platforms like Facebook Marketplace and OfferUp will become a mainstay for consumers.