President Donald Trump's persistence to impose larger tariffs on Chinese goods is set to hamper the bottom lines of the country's largest retailers.
Macy's is one of those retailers who have voiced out their concern. According to Macy's CEO Jeff Gennette, the recent tariff hike on over $300 billion worth of Chinese goods will negatively impact their apparel and footwear business in the United States. The executive also stated that it won't be long until the problem trickles down and hits consumers in the coming months.
The executive of one of the country's largest department stores revealed that they were having problems finding a solution that wouldn't impact customers. Gennette explained that their apparel and accessories businesses are likely the categories that will be greatly impacted by the increased tariffs.
Majority of the components and products in these categories are sourced from China, which means that an increase in taxes from 10 percent to 25 percent will significantly be eating into profit margins. This will include Macy's various in-house brands and its various national labels sold in its stores nationwide.
Additionally, Gennette revealed that the tariff hike will negatively affect its furniture business, but the firm is looking into ways to soften the blow. To ease the minds of its shareholders, the executive revealed that they have already laid out different strategies to mitigate the impact on consumers. If these strategies will work, the company should be able to limit customer concerns despite the increased tariffs. Macy's is still confident in its profit outlook for the rest of the year, but another tariff hike could spell disaster.
The exact nature of the firm's strategies was not detailed. However, the company did previously mention that it would be cutting down management positions with a target of saving up to $100 million in annual costs. The company also sees growth potential in its e-commerce business, which has been seeing double-digit growth in the past quarters. Mobile e-commerce is currently the firm's fastest-growing channel for sales growth.
Gennette made the comments at the firm's first-quarter earnings call, where Macy's reported earnings that exceeded analyst forecasts. The company reported net income of $136 million for the first quarter ending May 4. This equates to an earnings per share of $0.44. While it did beat initial forecasts, the firm's earnings were slightly below its number reported on the same period last year. Overall revenues dropped to $5.504 billion from $5.541 billion. However, revenues were still within initial forecasts of around $5.505 billion.
