SW Retail Advisors founder Stacey Widlitz breaks down the latest news from the retail sector as companies prepare for the holiday season.
Dollar Tree said Wednesday it may adjust or even eliminate certain products if President-elect Trump’s proposed tariffs take effect.
The discount retailer, which has high exposure to China, told analysts it has a “wide range of potential actions” it can take to mitigate additional tariffs if they materialize, including changing product details or sizes and even getting rid of items altogether if they become too expensive.
Under the proposals, a universal 10%-20% tariff would be imposed on imports from all foreign countries, and an additional 60%-100% tariff would be imposed on imports specifically from China. Last month, Trump reiterated the threat, saying he would issue an executive order upon taking office to charge Mexico and Canada a 25% tariff on all products coming into the U.S.
TRUMP’S PROPOSED TARIFFS COULD DRIVE UP FOOD PRICES, EXPERTS SAY
Dollar Tree said the last time the retailer faced this issue, in 2018 and 2019, it adjusted its products and negotiated lower costs with suppliers.
“Those options are still at our disposal,” Interim CEO Michael Creedon told analysts on an earnings call Wednesday. “On top of those, we now have detailed plans in place to shift supply sources for most of our products to alternate countries, and multi-price gives us additional flexibility on our product assortment.”
A Dollar Tree store in Kingston, N.Y., Feb. 16, 2024. (Angus Mordant/Bloomberg via Getty Images / Getty Images)
According to a regulatory filing, Dollar Tree directly imports as much as 43% of its total retail value purchases, with the vast majority from China.
“China is the source of a vast majority of our direct imports, and we believe that a significant portion of our goods purchased from domestic vendors is imported,” the company said in a March 2024 filing.
Dollar Tree, which lost its CEO last month and continues to contend with lackluster demand and a highly competitive landscape, is the latest in a string of economists and retailers, including heavy hitters such as Walmart, who have commented on how tariffs would affect business.
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Walmart Chief Financial Officer John David Rainey warned tariffs “are going to be inflationary.”
A Dollar Tree July 28, 2014, in Miami, Fla. (Joe Raedle/Getty Images / Getty Images)
“Likely consumers are going to pay more for the items that they buy and that these tariffs are applied to,” he told FOX Business.
While Rainey said two-thirds of the items the company sells are made, grown or assembled in the U.S., he said the company is “in no way immune to this.”
Goldman Sachs warned in a note that Trump’s proposed plans would add a tax on 43% of U.S. imports and could push inflation higher by nearly 1%.
“Using our rule of thumb that every 1 [percentage point] increase in the effective tariff rate would raise core [personal consumption expenditures] PCE by 0.1%, we estimate that the proposed tariff increases would boost core PCE prices by 0.9% if implemented,” the note, written by Goldman Sachs economists Alec Phillips and Ronnie Walker, states.
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Trump-Vance transition spokesperson Karoline Leavitt, Trump’s pick for his press secretary once he takes office, previously told FOX Business that, during Trump’s first term, the tariffs imposed on China “created jobs, spurred investment and resulted in no inflation.”
She said Trump plans to restore the economy, in part, by “re-shoring American jobs, lowering inflation, raising real wages, lowering taxes, cutting regulations and unshackling American energy.”
