Investing.com — Bernstein analysts on Tuesday highlighted potential tariff risks for major U.S. retailers in light of President-elect Trump's pledge to impose tariffs on imports from Canada , Mexico and China.
Among retailers, Dollar Tree (NASDAQ:) and Target (NYSE:) have been identified as particularly exposed due to their significant reliance on imported products, which represent a substantial portion of their cost of goods sold (COGS).
The company's analysis indicated that consumer goods such as computers, mobile phones, toys, games, electrical appliances as well as clothing and textiles, mainly imported from China and Mexico, would be the most affected by the proposed rates.
In addition, the report mentions possible indirect impacts due to rising prices of raw materials, such as oil, gas and aluminum, although these could be offset by an increase in domestic production.
According to Bernstein, Target and Dollar Tree have the most exposure to imports, with estimates suggesting that imports represent 50% or more of their total exposure, direct and indirect.
“This is largely consistent with our hedge companies ranking based on their number of shipping containers imported per $100 million in sales in FY23, with DLTR and TGT being the top importers,” the analysts said led by Zhihan Ma.
Target has the highest proportion of COGS tied to imports, around 50%, among mass retailers and clubs. Walmart (NYSE:) follows, with about a third of its COGS coming from imports. Analysts note that categories such as clothing, toys and sporting goods, particularly imports from China, could face increased exposure to tariff risks.
In the home renovation sector, Home deposit (NYSE:) and Lowe's (NYSE:) are similarly dependent on imports, with approximately 40-50% of their COGS coming from international sources. Bernstein points out that Lowe's focus on appliances and electrical products could lead to greater vulnerability to potential tariffs.
The report also reflects 2019 pricing, in which Target and Dollar Tree experienced unfavorable gross margin of approximately 30 to 40 basis points in the affected quarters due to increased product costs. Lowe's reported a similar impact, of about 25 to 40 basis points.
The analysis warns that, depending on the specifics of any new tariff, retailers with high exposure to Chinese imports could face similar margin pressures.
Although tariffs on Canadian and Mexican imports are expected to have a lesser effect on targeted retailers, the electronics and appliance sectors could still be affected due to significant imports of computers and appliances electricity from Mexico.
“Companies with significant exposure to the electronics and appliances categories could be affected, although the precise impact and level of tariffs are unclear at this stage,” the analysts wrote.
#Trump #tariffs #American #retailers #Investing.com
,
