SW Retail Advisors founder Stacey Wiedlitz shares the latest news from the retail sector as companies prepare for the holiday season.
Dollar tree said Wednesday that it may adjust or even eliminate some products if President-elect Trump’s proposed tariffs take effect.
The discount retailer, which has extensive exposure to China, told analysts it has a “wide range of potential actions” it could take to mitigate additional tariffs if they materialize, including changing product details or sizes and even waiving the tariffs altogether. goods if they become too expensive.
Under the proposals, a universal tariff of 10%-20% would be imposed on imports from all foreign countries, while an additional tariff of 60%-100% would be imposed only on imports from China. Last month, Trump repeated the threat, saying that after taking office he would issue an executive order to impose 25% tariffs on all products entering the US from Mexico and Canada.
EXPERTS SAY TRUMP’S PROPOSED TARIFFS
Dollar Tree said the last time the retailer faced the problem in 2018 and 2019, it changed its products and negotiated with suppliers to reduce costs.
“Those options are still in our hands,” interim CEO Michael Creedon told analysts on Wednesday’s earnings call. “In addition, we now have detailed plans to shift the sourcing of most of our products to other countries, and multiple pricing gives us additional flexibility in our product mix.”
A Dollar Tree store in Kingston, New York on February 16. (Angus Mordant/Bloomberg via Getty Images/Getty Images)
According to regulatory filings, Dollar Tree directly imports up to 43% of its total retail value of purchases, with the vast majority from China.
“China is the source of the vast majority of our direct imports, and we believe that a significant portion of our goods purchased from domestic sellers is imported,” the company said in a March 2024 statement.
Dollar Tree, which lost its CEO last month and continues to struggle with lackluster demand and stiff competition, is the latest in a string of economists and retailers, including heavy hitters like Walmart, commenting as tariffs will affect business.
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Chief Financial Officer of Walmart John David Rainey warned that the tariffs “will be inflationary”.
A Dollar Tree store in Miami on July 28, 2014. (Joe Riddle/Getty Images/Getty Images)
“Consumers may end up paying more for the products they buy that are subject to these tariffs,” he told FOX Business.
While Rainey said two-thirds of the products the company sells are made, grown or assembled in the U.S., he said the company is “by no means immune to that.”
Goldman Sachs warned in a note that Trump’s proposed plans would add a 43% tax on US imports and could increase inflation by almost 1%.
“Using our rule of thumb that each 1 (percentage point) increase in the effective tariff rate would lead to a 0.1% increase in core (personal consumption expenditure) PCE, we estimate that the proposed tariff increase would raise core PCE prices by 0.9% if it is implemented,” said a note written by Goldman Sachs economists Alec Phillips and Ronnie Walker.
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Trump-Vance transition spokeswoman Caroline Leavitt, Trump’s pick for press secretary when he takes office, previously told FOX Business that during Trump’s first term, tariffs imposed in China “created jobs, spurred investment, and didn’t to inflation.”
She said Trump plans to restore the economy, in particular, by “saving American jobs, reducing inflation, raising real wages, cutting taxes, reducing regulations and deregulation of American energy.”
