Tariffs and trade war are squeezing us, say executives from Kohl’s, JCPenney

(NBC News) – Kohl’s, JCPenney and Home Depot executives were united in their messaging against additional taxes on imports from China, as they spoke with analysts during post-earnings conference calls Tuesday.

Kohl’s, which saw its stock dive to a 52-week low after cutting its earnings estimates, blamed part of the reason for its lower forecast on a hit from tariffs.

“Right now these tariffs primarily affect our China-sourced merchandise in our home and accessories business,” Kohl’s Chief Financial Officer Bruce Besanko told analysts on a post-earnings call. “China is not our largest source of merchandise but it is a big one. It’s a little over 20 percent of our goods.”

Kohl’s Chief Executive Officer Michelle Gass called this a “very fluid situation,” adding that Kohl’s is “working very closely with our vendors to make sure that collectively we’ve got a strong plan.”

The White House has threatened to slap another round of 25 percent tariffs on roughly $325 billion in Chinese goods that would include apparel and footwear. That’s after a third round of tariffs, impacting goods like furniture and accessories including handbags, took effect earlier this month.

“In the guidance we’ve assumed that there would be an impact to the gross margin, which is in part why we’ve reduced the outlook for margin from what we previously had,” Kohl’s CFO Besanko went on. “There are two components to that. One is this tariff increase.”

Meanwhile, retail rival Penney — which said net losses during its fiscal first quarter nearly doubled — said new tariffs could end up hurting its in-house brands, similar to Macy’s CEO Jeff Gennette’s statement last week. Retailers have turned to private-label brands to try to boost profitability. But tariffs will dampen the benefits of this approach, as the retailers will be forced to absorb costs themselves.

“In looking ahead, we do anticipate a more meaningful impact on both our private and national brands if the potential fourth tranche of tariff does go into affect on all Chinese imports,” Penney CEO Jill Soltau told analysts.

Tariffs have so far had a “minimal impact” on Penney’s business, with the three rounds that have already gone into effect, Soltau said.

Home Depot, meanwhile, said it had absorbed “roughly a billion dollar impact” to its business so far, which the company described as “manageable.”

However, the latest round of 25 percent tariffs aren’t baked into the retailer’s latest forecast. CFO Carol Tome said, “We are working through the impact of these tariffs and, as a result, have not included them in today’s guidance.”

On the heels of a disappointing earnings report, Kohl’s shares were falling more than 11 percent on Tuesday, on pace for their worst day since Jan. 5, 2017, when the stock lost just over 19 percent. Penney shares were down 9 percent. Home Depot’s stock dropped less than 1 percent.

Chinese President Xi Jinping this week ramped up his rhetoric by saying China is embarking on a “new Long March, and we must start all over again!” Although he didn’t mention the U.S. or the ongoing trade war, the remarks are interpreted as a clear sign China isn’t going to cave to the Trump administration any time soon.

Also this week, more than 170 shoe retailers, including Nike and Under Armour, sent a letter to President Donald Trump, saying 25 percent tariffs could lead to certain families paying a nearly 100 percent duty on shoes.

NBC News

NBC News

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