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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.