Retailers Warn Of Price Increases Due To Trump Tariffs As Consumer Health Concerns Persist

by Adam Eckert Benzinga Staff Writer

Retailers are facing selling pressure this week following warnings about continued consumer uncertainty and the potential impacts of tariffs.

What To Know: Trade war fears are rising after President Donald Trump imposed 25% tariffs on imports from Canada and Mexico earlier this week. Trump also doubled tariffs on China from 10% to 20%, which has been met with retaliatory tariffs on American goods.

Consumer confidence has also soured in recent months as some GDP forecasts have turned negative and consumer spending unexpectedly declined in January. Inflation also remains top of mind with Consumer Price Index data from January showing a 3% rise, above economist forecasts. If inflation remains elevated above the Federal Reserve's 2% goal, rates are not likely to come down anytime soon.

Earnings from retailers this week have also weighed on consumer sentiment. Despite beating estimates on the top and bottom lines in the fourth quarter, Target Corp TGT shares plunged after the retailer warned that February sales were weak and said it expects to see a “meaningful” decline in profits in the first quarter.

Target attributed “soft” February sales to declining consumer confidence paired with cold weather, per CNBC.

“Looking ahead, we expect to see a moderation in this trend as apparel sales respond to warmer weather around the country, and consumers turn to Target for upcoming seasonal moments such as the Easter holiday,” CFO Jim Lee said. “We will continue to monitor these trends and will remain appropriately cautious with our expectations for the year ahead.”

Target CEO Brian Cornell also told CNBC that Trump’s tariffs on Mexican imports that went into effect on Tuesday could end up causing Target and other grocers to increase prices on produce such as bananas, strawberries and avocados.

Best Buy Co BBY also reported earnings this week that came in above analyst expectations, but shares traded down after CEO Corie Barry warned price increases are “highly likely” due to Trump’s tariffs, according to CNBC.

Barry told investors and analysts on the earnings call that about 55% of Best Buy’s products are sourced from China and about 20% come from Mexico.

“Trade is critically important to our business and industry. The consumer electronic supply chain is highly global, technical and complex. We expect our vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely,” Barry said.

Although the company only directly imports about 2% to 3% of its products, Best Buy is reportedly making adjustments to its supply chain sourcing in response to tariffs. The company also expressed concerns about the consumer’s ability to keep spending in the face of price increases.

"The giant wild card here, obviously, is how the consumers are going to react to the price increases, in light of a lot of price increases potentially throughout the year and a general consumer confidence that is showing little signs of weakness at the moment," Best Buy CFO Matt Bilunas reportedly said on the conference call following earnings.

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