The retail sector is under heavy selling pressure on Thursday as Wall Street digests President Donald Trump's tougher-than-anticipated tariff plan.
What To Know: Trump on Wednesday announced sweeping tariffs aimed at reshaping global trade and boosting American manufacturing, including a universal 10% tariff on all imports starting April 5 and significantly higher rates targeting around 60 countries deemed “major offenders” for imposing barriers on U.S. goods.
Many retailers and brands manufacture goods in China and Vietnam which now have effective tariffs rates of 54% and 46%, respectively. Stocks of companies that rely heavily on imports are experiencing significant declines as Wall Street digests the implications of the new tariff structure.
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S&P Global analysts recently warned that steep tariffs would affect retailers disproportionately and more severely than they had in the past.
“Broad-based tariffs could hurt more U.S. consumer products and retail companies this time around than in 2018,” analysts wrote.
“Price increases will be harder to pass along to the consumer this time around because of the recent inflation cycle and already weak consumer environment,” the analysts wrote, per The Street.
Approximately, one-third of footwear imports come in the U.S. from Vietnam, according to the Footwear Distributors and Retailers of America. Shares of footwear companies who manufacture in Vietnam, including Nike, Inc. (NYSE:NKE) and UGGS-parent Deckers Outdoor Corp. (NYSE:DECK) were down dramatically on Thursday.
Best Buy, Inc. (NYSE:BBY) stock was on track for its worst day since March 2020. The electronics retailer sources approximately 60% of its goods from China with goods from Mexico also making up a significant percentage, according to S&P Global.
Five Below, Inc. (NASDAQ:FIVE) also imports a large share of its goods and saw its stock price fall nearly 30% in Thursday's midday trading.
Lululemon Athletica, Inc. (NASDAQ:LULU) sources approximately 40% of its products from Vietnam and 17% from Cambodia, according to data from Quartz. Both countries have been hit with steep tariff rates – 46% for Vietnam and 49% for Cambodia.
William Blair analyst Sharon Zackfia said in a note Thursday that the tariffs could result in a 7% hit to Lululemon's margins if the company takes no action.
Several other retail stocks were tumbling in Thursday's midday trading, including:
- American Eagle Outfitters, Inc. (NYSE:AEO)
- Capri Holdings Limited (NYSE:CPRI)
- Gap, Inc. (NYSE:GAP)
- Macy’s Inc. (NYSE:M)
- Ralph Lauren Corp. (NYSE:RL)
- Under Armour, Inc. (NYSE:UA)
- Urban Outfitters, Inc. (NASDAQ:URBN)
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