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Top executives at TJX Companies and Burlington Stores both said they expect to benefit from President-elect Donald Trump’s threats to slap tariffs on a wide range of U.S. imports.
TJX’s CEO Ernie Herrman told analysts last week on a quarterly call, “When there's chaos out there in the market a little, if that happens a little bit on certain categories, ultimately, usually, that's an opportunity for us.”
Herrman added that similar to past tariff threats or the unforeseen disruption tied to the recent pandemic, the benefits may accrue even if the proposed hikes aren’t fully implemented. He said, “Manufacturers could bring in goods early … That could create actually even additional availability of goods at advantageous prices for us because we can take advantage of that opportunistically.”
Under Trump’s proposals pushed forward on the campaign trail, a universal 10%-20% tariff could be imposed on imports from all foreign countries and an additional 60%-100% tariff could be imposed on imports specifically from China.
Michael O'Sullivan, CEO at Burlington, on a quarterly call Tuesday noted that it’s unknown to what extent tariffs might be applied but expressed similar comments to Herrman.
“My experience has been that whenever there is significant uncertainty or disruption in the external environment, then while that can be a headwind and a headache for everyone, including us in the short term, the uncertainty and disruption is often very good for off-price retail in the end,” said O'Sullivan. “The reason why uncertainty disruptions often work out well for off-price is that the off-price business model, when it's well executed, is better able to handle the uncertainty and respond to whatever happens.”
Many apparel and footwear vendors have reduced their exposure to producing apparel and footwear in China due to rising labor costs and geopolitical tensions with the West, but the country remains the largest source of U.S. imports for both categories. The tariff threats are expected to accelerate moves to diversify sourcing.
“It’s an ongoing conversation with our business partners, our manufacturers, our suppliers and making sure that they’re thinking about if something can be made outside of China, that’s going to be advantageous,” Macy’s Inc. chairman and CEO Tony Spring recently said at Yahoo Finance's Invest conference.
He pointed out that tariff action in the past has “opened up South America and other parts of Asia.”
Walmart, Lowe’s, Best Buy and several industry trade groups have all predicted prices will increase to offset higher production costs related to tariffs. Analysis by the National Retail Federation showed that under Trump’s proposed tariffs, U.S. production of apparel and footwear would expand, but consumers would pay $20 and $32 for every additional dollar earned by U.S. apparel and U.S. footwear producers, respectively.
Matthew Shay, NRF chairman and CEO, said in a statement, “The adoption of across-the-board tariffs on consumer goods and other nonstrategic imports amounts to a tax on American families. It will drive inflation and price increases and will result in job losses.”
Many observers aren’t convinced that Trump will go through with his tariff plans as they may run counter to his goal of bringing down consumer prices. However, on social media posts Monday, Trump vowed to impose tariffs on Mexico, Canada, and China to clamp down on drugs and illegal immigration.