U.S.-China trade dispute weighing on retail sector
With the two biggest economies locked in trade standoff, retailers like Foot Locker and Calvin Klein feel the crunch
Pressure from the trade dispute between the U.S. and China is weighing on the retail sector, with shares of many in the industry falling in premarket trading on Thursday.
Retailers have seen their shares seesaw this week as they express concern over tariffs squeezing their businesses. The latest is PVH Corp., owner of the Calvin Klein and Tommy Hilfiger brands, which said late Wednesday that it was cutting its full-year adjusted earnings forecast partly because of the U.S.-China trade dispute.
“The volatile and challenging macroeconomic backdrop has continued into the second quarter, with particular softness across the U.S. and China retail landscape,” PVH Chairman and CEO Emanuel Chirico said in a statement.
Shares of PVH dropped 10.5% before the market open Thursday, after sliding 7.2% this week.
Retail sales have been on a seesaw pattern in 2019. The Commerce Department reported earlier this month that after a big jump of 1.7% in March, U.S. retail sales declined 0.2% in April as Americans cut back their spending on clothes, appliances, and home and garden supplies.
Executives from a wide array of stores from Walmart to Kohl’s said on conference calls with analysts the past few weeks that they remain optimistic about the financial health of the consumer, citing low unemployment and a strong economy. But shoppers could balk at paying higher prices on things they don’t need, especially those in the lower income bracket who are sensitive to any cost increases.
Last week Foot Locker Inc. and more than 170 shoe and retail companies, including Adidas and Nike, sent a letter to President Donald Trump urging him not to double down on new tariffs as the trade dispute with China drags on. Foot Locker’s stock, down 6.5% in the week to date, fell slightly in the premarket.
The world’s two biggest economies have been locked in a standoff for months over allegations that China deploys predatory tactics – including stealing trade secrets and forcing foreign companies to hand over technology – in a drive to supplant U.S. technological dominance.
China’s state media warned on Wednesday that Beijing could cut America off from exotic minerals that are widely used in electric cars and mobile phones as it faces new trade sanctions and a U.S. clampdown on its top telecommunications company, Huawei.
The U.S. has imposed 25% tariffs on US$250 billion in Chinese imports and is planning to tax the $300 billion in imports that have so far been spared including toys, shirts, household goods and sneakers.
Dollar Tree said Thursday that its fiscal 2019 forecast doesn’t include the potential tariffs tied to the next list of targeted goods.
“If tariffs on (those products) are implemented, we expect that it will be impactful to both our business, and especially to consumers in general,” President and CEO Gary Philbin said in a statement.
Dollar Tree Inc.’s stock, which has dipped 3.2% this week, slid 5.6% in premarket trading.