The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
CINCINNATI, United States — Macy's Inc., which already trimmed its guidance earlier Wednesday, sees looming US tariffs reducing its per-share profits this year by a nickel at most, according to Chief Executive Officer Jeff Gennette.
The department store company now has more visibility after official lists showed which items will see an additional 10 percent levy as of September 1 and which ones will be affected as of December 15. The retailer has had some time to digest the items and communicate with brand partners and develop strategies that should help shelter the company, Gennette said. The conversations have been about how much of the tariffs would be absorbed by partners and how much would be passed on to customers as a price increase, he said.
“The full risk of this for 2019 could be up to five cents in the annual earnings,” Gennette said. “We’re evaluating all of it. It’s not a big impact. I’m confident that between now and all of our strategies flying in 2020 and beyond, we’re going to be able to work through this.”
Macy’s earlier reduced its guidance for for adjusted earnings per share this year by 20 cents, to a range of $2.85 to $3.05. But that change left out any potential effects of the tariffs.
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The up-to-five cent impact would be if the tariffs stay at the 10 percent level. If they go up to 25 percent, Gennette said, “it’s a different ball game.”
Gennette said Tuesday’s news that the US will delay the imposition of new tariffs on a number of products, including some apparel and toys, didn’t come as a surprise to him. He said he’d been alerted that an update on the situation was coming.
Macy’s faced a challenging second quarter, from excessive markdowns to anaemic same-store sales. Falling international tourism sales also had an impact.
When it comes to tariffs, Macy’s said on Wednesday it’s working with brand partners and suppliers to mitigate the impact for consumers, who Gennette noted are sensitive to higher prices. A key part of these talks hinge on whether or not to raise prices.
“We certainly have conversations with them about what they’re doing about costs, how they’re mitigating costs with initial tariffs going on those goods,” Gennette said. “Those are where the conversations are going.”
The brand partners are “very savvy” in finding solutions, such as what prices customers will bear, he added.
Shares of Macy's suppliers, including PVH Corp. and Ralph Lauren Corp., tumbled on Wednesday amid a broader rout of US equities.
It’s still not clear exactly how much of Macy’s inventory will be affected by the upcoming round of tariffs. Gennette declined to offer details.
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