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Retail stocks slid further Friday, a day after they buckled as a dreaded fourth round of tariffs moved swiftly from a possibility to a near reality with a tweet storm.
President Donald Trump tweeted Thursday that on Sept. 1, the U.S. will add a 10% tariff on the remaining $300 billion worth of Chinese imports that had been spared duties.
Many consumer products — including clothing, shoes and electronics — had been spared from the last three rounds of tariffs. But the remaining $300 billion of China-made goods are now targeted.
Most retailers are letting lobby groups speak on their behalf on the issue as investors wait for earnings, but not all.
"Let's not tank the economy with the misguided conception that trade wars are fun," Columbia Sportswear CEO Tim Boyle said in a statement.
Tariffs are "a disaster for the American economy, employers and consumers," he continued, adding that his company and others "will be forced to raise prices."
Shares of Best Buy shed almost 11% Thursday, and slipped a bit further Friday before turning positive in the afternoon. Until now, the consumer electronics retailer has said, tariffs impacted around 7% of the total cost of goods sold.
When analysts asked executives to define the impact if a fourth round of tariffs were levied, then-CEO Hubert Joly said: "While we understand List 4 as proposed is comprised of many consumer items, including many electronics, we think it is premature to speculate on the impact of further tariffs, as it is unclear whether List 4 will actually be implemented, what products would ultimately be included, at what rate, and when."
Shoe-maker Steve Madden shares shed more than 9% Thursday, and tumbled another 2.6% on Friday. Madden is on a number of analysts' watch lists as a name that could be particularly hard hit if tariffs are levied on shoes. Piper Jaffray estimates 94% of Madden's manufacturing is done in China.
A whopping 70% of shoes sold in the U.S. comes from China, according to the Footwear Distributors & Retailers of America, an industry organization with more than 500 members including Madden.
Department stores, including Macy's, Kohl's and Nordstrom, were among the carnage on Thursday, but were about flat on Friday. All three sell a mix of national brands like Nike and Ralph Lauren along with their own private label and exclusive merchandise. While department stores will see categories previously excluded from recent tariffs like apparel now subject to the extra duties, at least for the national brands there may be some level of splitting the higher costs between the vendors and the department stores.
Macy's had said it has mitigation strategies in place, and each category is being looked at individually. When it comes to price increases, the retailer has said it will hold prices on some products, likely those that are more elastic. In other cases, prices will rise. Home Depot is employing a similar strategy.
Cowen & Company estimates Gap and L Brands have around 20% sourcing exposure to China. Both retailers are mostly vertically integrated, meaning the goods sold are manufactured just for their own brands, which means there aren't vendors to help absorb, or split, the higher costs from tariffs.
But even retailers with lower exposure to Chinese manufacturing, like Coach and Kate Spade owner Tapestry and Michael Kors' parent Capri Holdings sold off sharply in reaction to pending tariffs. Tapestry shares were up less than 1% on Friday, while Capri slipped 2.7%.
Many retailers have been working on diversifying supply chains outside of China for years, and in many cases have tried to accelerate those plans when possible over the last year. Still, more U.S. sold apparel is made in China than anywhere else. In 2018, 42% of all U.S.-sold apparel was made in China, according to the American Apparel & Footwear Association.
RH is one of the retailers that has been looking at production outside of China. In a statement Thursday, the company formerly known as Restoration Hardware, said it is evaluating "multiple sourcing alternatives outside of China" and "expects no impact" to its current fiscal year or next year from the new tariffs.
The furniture seller said the categories subject to the Sept. 1 tariffs make up less than 1% of its total inventory receipts for fiscal year 2019 and less than 2% of anticipated inventory for fiscal 2020. RH shared closed down more than 2% Thursday, and flat Friday.
"We are disappointed the administration is doubling down on a flawed tariff strategy that is already slowing U.S. economic growth, creating uncertainty and discouraging investment," said David French, senior vice president for government relations at the National Retail Federation. "The tariffs imposed over the past year haven't worked."
"American families shouldn't be a pawn in this trade war" Hun Quach said in a statement from the Retail Industry Leaders Association.
Rick Helfenbein, CEO and president of the American Apparel & Footwear Association, called the president's announcement "truly shocking."
"The fact that this tweet comes after only one meeting with the Chinese delegation following the resumption of talks is extremely concerning," Helfenbein said.