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Tariffs can lead to markdowns in retail stocks



By Caroline Valetkevitch

NEW YORK (Reuters) ̵

1; US retailer stocks have moved from floating to broken this year, and the intensification of the US and China trade war makes them particularly vulnerable because consumer products will be targeted in the next round of threatened tariff increases.

The potential impact of the trade conflict is likely to be a key issue next week when Home Depot, Nordstrom, Kohl and Target are due to report results.

Although reported better than expected earnings, Macy's shares fell this week, saying that recent tariffs on imports from China by Washington hit its furniture industry and warned that additional tariffs would affect clothing and clothing. other areas.

Later last week, after Washington introduced a tariff increase of 25% of Chinese imports, $ 200bn. Dollars, US President Donald Trump ordered his trading manager to begin the import process for all remaining imports from China,

The proposed list of products subject to possible US tariffs will cover almost all consumer goods such as clothing, shoes and lawn mowers.

Graphic: Value for US tariffs proposed and introduced May 15 https: // tmsnrtrsrs / 2W2ghcJ

Software 1500 The sellers' price index had surpassed the benchmark S & P 500 this year as the market jumped back from December sales and optimism grew that the US and China could soon reach a trade agreement.

However, the index has fallen more than the wider market in recent weeks, as the optimism of the trade front has been destroyed. Since April 30, the retail index of approx. 3.4% compared to about 2.5% decrease in S&P 500.

"There has already been an influence. The question is, how much more of an influence is it. Combined with slugglish sales, it is not a Good combination for feelings in some retail right now, "says Michael James, Managing Director of Stock Trading at Wedbush Securities in Los Angeles.

Dealers have struggled to tighten the grip of Amazon.com, and recently, investors have been worried that wage pressure may be a greater risk to the group.

Graphic: Dealers under pressure https: // tmsnrtrsrs / 2WQpeD4

US government data this week seemed to add to the concerns. The US retail sales fell unexpectedly in April, as households reduced by the purchase of motor vehicles and other goods.

The results of the retailers in the coming days round off an earnings season that has been largely better than expected.

First quarter S & P 500 earnings are now expected to have risen by 1.4 per cent. From one year ago to a fall of 2.0 per cent. In early April, according to IBES data from Refinitiv.

There have been concerns that the S & P 500 would have a "profit" recession "of at least two quarters of declining earnings this year, but recent developments at the merchandise show only excess earnings prospects for retailers and other businesses. [19659017] "It's the biggest macro game card to the market," said Anthony Saglimbene, global market strategist at Ameriprise Financial in Troy, Michigan.

So far, retail retailing has only been limited from tariffs, according to Bank of America Merrill analyst Lynch.

"We see food and discount retailers largely isolated from the latest tariff increase to 25% of $ 200 billion of Chinese imports," they wrote in a note on Thursday.

In case of additional tariffs, retailers may modestly raise prices – about 1% to 3% – to fully compensate for the gross profit effect from tariffs, they added.

At least add r tariffs complications for retailers.

"It's at the center of it's rising input costs," says Simeon Siegel, an analyst at the Nomura Instinet in New York.

"Personally, I don't think anyone has the ability to raise prices anymore. If the tariffs are maintained depending on the level of cost inflation and their ability to push back, this can be anywhere from margin that destroys businesses that destroy . "

(Reporting by Caroline Valetkevitch; Additional Reporting by Lewis Krauskopf; Editing Alden Bentley and Nick Zieminski)


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