Wed | Nov 25, 2020

Brutal week for retail sector

Published:Friday | May 31, 2019 | 12:00 AM
A shopper searches her purse outside a Dollar Tree store in Encinitas, California.

Pressure from the trade dispute between the United States and China is weighing on the retail sector, with shares of many in the industry falling in pre-market trading on Thursday.

Retailers have seen their shares see-saw 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 US-China trade dispute.

“The volatile and challenging macroeconomic backdrop has continued into the second quarter, with particular softness across the US and China retail landscape,” PVH Chairman and CEO Emanuel Chirico said in a statement.

Shares of PVH dropped 10.5 per cent before the market open Thursday, after sliding 7.2 per cent this week.

Retail sales have been on a see-saw pattern in 2019. The US Commerce Department reported earlier this month that after a big jump of 1.7 per cent in March, US retail sales declined 0.2 per cent 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 in 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 baulk 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 US 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 per cent in the week to date, fell slightly in the pre-market.

The world’s two biggest economies have been locked in a stand-off 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 US 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 US clampdown on its top telecommunications company, Huawei.

The US has imposed 25 per cent tariffs on US$250 billion in Chinese imports and is planning to tax the US$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 does not 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 per cent this week, slid 5.6 per cent in pre-market trading.

– AP