What Retailers are Saying About Tariffs - Part 7
This is a continuation of previous articles from , April 21, May 8 and May 11, May 18 , May 25 and June 1.
As noted in the previous articles, this is a compilation of quotes from shippers taken from earnings transcripts (Seeking Alpha). Note that links will take you to the individual company’s investor relations page.
There’s so much content noise so I find it useful to understand the market by reading what shippers are directly saying each quarter.
I’m finishing up on the Logistics M&A through the end of May - Look for it this week, hopefully. The report will be available free for paid Substack subscribers but I’ll provide a summary and a link to the report in case you’re interested in either purchasing it separately or paying for an anuual subscribtion to my Substack articles. 🙂
Look for the next article in this series in a few weeks. 🛒
A big thanks to you all for reading my articles. 🙏🙏🙏
Retailers
Dollar Tree
Q1 ending May 3. Reported June 4
Our merchant and operations teams have spent the past several years developing contingency plans to address a wide range of potential disruptions to global trade, including tariffs. As a result of these efforts, we have multiple tools in place to address any challenges. As a reminder, the 5 levers we have available to address cost inflation, including tariffs, are negotiating with our suppliers, respeccing products, moving country of origin, dropping noneconomic items and leveraging our expanded multi-price capabilities. Michael C. Creedon - CEO & Director
Today, we are actively engaged on multiple fronts to mitigate the impact of inflationary cost pressures, including tariffs. As we discussed last quarter, our teams effectively used these levers to offset 90% of the first round of tariffs, the initial 10% announced in February, and we are continuing to employ these levers to address the latest round. But the tariff landscape is highly fluid and changing week-to-week. So we are focused on agility and on improving that agility. As always, our goal is to use our significant scale, combined with the uniqueness and flexibility of our assortment to secure the lowest landed cost on the products we source and provide our customers with compelling products at a great relative value. Michael C. Creedon - CEO & Director
The evolution of our business model towards multi-price has added a new dimension to our agility. Multi-price allows us to expand our product assortment to give customers access to a wider variety of items at a wider variety of value-centered price points. This way, our offerings remain attractive and relevant under a wide range of macro inflationary and tariff scenarios. Michael C. Creedon - CEO & Director
While we delayed some shipments in early April when the tariff adjustments were first announced, some products did arrive in the United States that were subject to the highest tariffs and some of those items will work their way through our system before the full breadth of our mitigation efforts are deployed. As such, we expect our second quarter profits to be meaningfully lower than last year in light of higher tariff and other costs, including some costs we absorbed during the 145% window on China tariffs. From a timing perspective, that is approximately $70 million more of a COGS impact in the second quarter than what was contemplated in our original 2025 outlook. Stewart F. Glendinning - Chief Financial Officer
Five Below
Q1 ending May 3. Reported June 3.
As we look forward, the tariff environment presents additional complexity and our teams have been working hard and moving swiftly on mitigation plans. Our plans include vendor negotiations, diversification of sourcing, continued investment in new value pack product as well as assortment and pricing adjustments with a focus on reducing the number of price points. Winifred Y. Park - President, CEO & Director
In terms of inventory flow, I would say this year is a little unusual given the tariff situation and kind of the stop starts and the pauses that we've seen. We specifically pause when the 145% tariff hit on China. And we have re-upped that the pause at 30 and our booking product in. We're actually ahead of time in terms of ordering product and just ensuring we've got the right flow. On a go-forward basis, it goes back to diversification of the sources and the vendors, both domestically as well as what we get from partners and vendor partners abroad. And so that's been a big push for us. We are looking. We'll be adding, for instance, we've got a great global sourcing office out of India that we're finally really able to leverage. Winifred Y. Park - President, CEO & Director
Ollie’s Bargain Outlet Holdings
Q1 ending May 3. Reported June 3.
Given the challenging environment, we believe there could be significant product and market share opportunities. The significant number of retail store closures over the past year has already resulted in strong deal flow and abandoned customers. This is only likely to increase going forward. We are aggressively going after market share by accelerating our store growth, expanding our digital marketing capabilities and enhancing our Ollie's Army customer loyalty program. Eric van der Valk - President, CEO & Director
Suppliers and manufacturers are under pressure as a result of this dynamic environment, but vendors are seeking retailers who have strong balance sheets to partner in moving inventory, and we're very well positioned for this moment. Eric van der Valk - President, CEO & Director
Our imports are typically 20% of our overall mix. So we've been taking a number of actions across our business to mitigate the tariff expense. Our vendors have really worked with us and been great partners thus far. But our biggest advantage is our flexible buying model that Eric mentioned, meaning that we can pick and choose the best deals in the marketplace. There's nothing that we -- absolutely nothing that we're committed to buying. Through this, we have reduced our exposure to China. In the past, it was closer to, say, 15%. For this year, we'd expect it to be closer to the 10% range. So that's a positive for our tariff mitigation. And then the last piece that I would say is, just as a reminder, we are a fast follower on pricing. We intend to maintain our value proposition and our pricing gaps, and we'll continue to adjust those as the marketplace shifts over the next couple of months. Robert F. Helm - Executive VP & CFO
Sportsman’s Warehouse
Q1 ending May 3. Reported June 3.
Early in Q1, we made proactive decision with select vendors to pull forward spring and summer inventory in categories impacted by tariffs, particularly in fishing and camping. While this temporarily elevated our inventory levels, it ensures we are well stocked in our key goods heading into these peak selling seasons. We'll continue to apply this approach in Q2 to ensure we're prepared for the critical hunting and holiday seasons. Importantly, we continue to anticipate ending the year with lower total inventory than last year and generating positive free cash flow. Paul Stone - President and CEO
Total inventory at the end of Q1 was $412.3 million up from $391.6 million in the same period last year. This increase reflects a strategic decision to pull forward approximately $20 million of inventory ahead of rising tariffs and to ensure we are fully prepared for the spring and summer seasons. This was not an across the board build. We focused on buying to its core items, high turning products and seasonally relevant merchandising categories like ammunition, fishing, camping and personal protection, areas where customer demand is more predictable and where being in stock matters most to our customers. We believe this was a low risk investment given these are high turning products. We will also continue to look for low risk inventory investment opportunities as we navigate the changing tariff environment. Jeff White – CFO
Tilly’s
Q1 ending May 3. Reported June 3.
As we look ahead in fiscal 2025, the potential impact of tariffs on product costs remains a concern, yet the currently known impacts on our product costs appear to be relatively minor. We have worked closely with all of our proprietary and branded partners to attempt to mitigate as much tariff impact as is reasonably possible. While tariffs have generally become less burdensome in recent weeks, we all realize this could change given the evolving nature of the tariff situation. Michael L. Henry - Executive VP, CFO & Corporate Secretary
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- Cathy
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I wear a number of hats these days. I’m also helping out the Reverse Logistics Association as a research manager, and at JOC, I help out as a research analyst and write a weekly LinkedIn newsletter, Freight Forward, summarizing JOC & other published articles and providing an outlook for the week ahead. In addition, be sure to check out my website and be sure to sign up to receive more blog posts.