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The Week Ahead: More Tariffs, and All Eyes on Barneys

Just when apparel companies and retailers thought they could catch their breath and keep their fingers crossed for a quick resolution to the U.S.-China trade dispute, all bets are now off again as new tariffs are set to begin on Sept. 1.

Tariffs: With President Trump adding a new 10 percent tariff on $300 billion in Chinese imports beginning Sept. 1 on goods—apparel, footwear and soft textiles–that weren’t taxed before, there’s a good chance consumers will see higher prices during the holiday shopping season as companies pass along some of the higher costs. That pass along might start even sooner in the third quarter with the back-to-school selling season.

Will consumers understand and go along with the price increases? Hard to say, but shoppers in the U.S. like a good sale. And given that the holiday selling season is rife with special promotions, consumers may just hold off on loosening their purse strings until a really good promotion comes along. At this point, with retailers set to disclose their second-quarter earnings reports in two weeks, many are likely to revise earnings guidance for 2019, and for their third- and fourth-quarter estimates.

Jobs and the Economy: The U.S. created slightly fewer jobs in July than expected, or 164,000 new jobs versus the predicted 165,000. So what does that mean? The report is still considered a respectable rate of growth. It points to steady growth, although with the numbers for May and June revised downward, growth has slowed down in 2019. The average monthly gain over a six-month period is 141,000, versus over 200,000 over the same period in 2018.

The Conference Board’s Gad Levanon, chief economist for North America, doesn’t expect employment growth to slow further given an economic growth rate that’s expected to remain above two percent for the rest of the year. He did note, however, “The combination of slower revenue growth and faster labor cost growth should continue squeezing corporate profits.”

Retail: Barneys New York may finally decide on what path it will take, an outright Chapter 11 bankruptcy filing or a connection with a white knight investor, if one can be found. The latter could result in a pre-packaged Chapter 11 filing, if only to help the luxury chain rid itself of certain leases.

Don’t expect Hudson’s Bay Co.’s Special Committee to actually decide yet on whether to proceed with the take-private proposal from an investor group led by chairman Richard Baker. The company said Friday that the review won’t be done until September 2019, although it did note that an initial analysis indicates the per-share offer price of 9.45 Canadian dollars, or $7.12, is “inadequate.”

That said, there could be more updates from each side, Baker and competitor Catalyst Capital Group Inc., as each vies for shareholder support. Both Baker and Catalyst did just that this week. But as the retailer’s special committee noted on Friday, the two proposals are different.

Baker’s proposal is for a 100 percent takeover of the company. The committee pointed out that the Catalyst offer is just for up to 14.8 million shares. It’s a move that, if successful, would only give Catalyst control of a sizable portion of the common shares held by minority shareholders and a greater say as it likely battles Baker’s group for a higher take-private share price.

Earnings: Capri Holdings Ltd. and Qurate Retail Group report on Wednesday, while Kontoor Brands Inc. reports on Thursday.

Events: UBM is hosting its New York Women’s fashion trade shows–Accessories Circuit, Moda, Project Women’s, Accessories The Show and Children’s Club–at the Jacob K. Javits Convention Center Aug. 4-6. FFANY’s Market Week runs from Aug. 5-9, with many exhibitors camping out at the Warwick Hotel at 65 W. 54 St., and around the city at independent showrooms.

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