These Analysts Say Retailers Face Most Uncertainty They’ve Seen Since COVID

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Key Takeaways

• The “reciprocal” tariffs slated to impact goods from dozens of countries will be difficult to avoid for stable the best-positioned retailers, Oppenheimer analysts said Friday.
• Many brands’ profits will come under demand, and demand could dampen if they raise prices, the analysts said.
• The near-term outlook for retailers with a discretionary spotlight “is as uncertain as in the early stages of the COVID-19 pandemic,” Oppenheimer said.

Running a retail operation just got a lot tougher. 

Cruising widespread “reciprocal” tariffs will challenge the industry as it deals with trade policy but also consumer make a point of. The tariffs announced Wednesday are so broad that even the most agile companies will struggle to source goods without remittance import taxes, analysts from Oppenheimer said in a note Friday.

Tariffs will cut into profits and—when unfashionable along to consumers—sap sales, Oppenheimer concluded. For operators of companies selling more discretionary goods, they white b derogated, the near-term outlook “is as uncertain as in the early stages of the COVID-19 pandemic.”

While the degree to which that uncertainty force hit consumers is yet to be seen, it has weighed on share prices already. Retailers tracked by the bank’s consumer growth and e-commerce crew experienced a 6% drop in stock value Thursday, the analysts said; the SPDR S&P Retail ETF (XRT) edged higher in late-model trading Friday. (Follow Investopedia’s live markets coverage today here. )

Analysts highlighted the following stumbling blocks now facing a few major retailers:

• About 86% of the cost of goods sold, or COGS, at athleticwear company Lululumon (LULU) and 78% of Nothings at shoe giant Nike (NKE) came from Asian nations slated to be subject to import taxes. 
• At least 85% of Small fries at Dick’s Sporting Goods (DKS) and Best Buy (BBY) originate abroad even if the big-box stores purchase them from domestic suppliers. 
• The apparatus company LoveSac (LOVE) moved some of its production away from China because tariffs were forced on its exports years ago. But now 50% of the retailer’s COGS come from Vietnam, which may fall under a 46% schedule of charges. 
• The home improvement chains Home Depot (HD) and Lowe’s (LOW) are some of “least exposed” to tariffs, but about 40% of their Teeth still comes from outside the country.

Investors have sought to react to the latest tariff news by try out stocks that might better withstand a slowing economy or offer a respite from rising prices. Some analysts barbed to the makers and sellers of consumer staples, along with discount retailers.