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The Week Ahead: Are Retail Warehouses Full?

Retailers begin reporting second-quarter earnings next week and Wall Street will be on the alert for an update on how they plan to deal with the impending $30 billion tax on consumers.

Tariffs: Per a tweet from President Donald Trump last week, the Office of the U.S. Trade Representative is preparing a list of which Chinese imports will be taxed the 10 percent duty from List 4 goods beginning on Sept. 1. That list is expected to be publicly disclosed shortly. The new tariff will hit $300 billion worth of imports that have never been taxed before, including apparel, footwear and some textiles.

When retailers were reporting first-quarter results in May, they were anticipating a July hike of 25 percent that was later put on temporary hold. Many at the time discussed mitigation strategies. For example, Brett Biggs, Walmart’s chief financial officer, said total inventory was up 5.9 percent because of “some accelerated buying in certain categories,” suggesting that one strategy was to buy more goods ahead of time. And while Walmart said it is working with vendors to help keep prices down, it didn’t rule out the possibility of having to raise prices at some point.

Other retailers have also thought about the impact on tariffs, whether it’s Five Below testing slightly higher prices or Lululemon Athletica air freighting goods in to avoid congestion at the ports. Most breathed a sigh of relief when the planned hike was delayed, hoping for an eventual resolution to the U.S.-China trade war.

Now they are scrambling again with just one month’s notice. And the Sept. 1 increase will impact goods arriving at U.S. ports during the fourth quarter, just in time for the holiday selling season. Have they stocked up enough so that warehouses are full? If so, have they stocked up on the right categories? And if not, has the stage been set for a round of markdowns later on? And, perhaps more importantly, will retailers be able to pass along the costs to consumers? These are questions that might be addressed when companies hold conference calls over the next few weeks as executives discuss their thinking in connection to guidance for the third and fourth quarters.

Earnings: and The RealReal will release earnings info on Tuesday; Macy’s and Canada Goose on Wednesday, and Walmart, J.C. Penney and Tapestry on Thursday.

Events: At MAGIC in Las Vegas, Nev., the Sourcing Show is Aug. 11-14, and Project/FN Platform/WWD MAGIC runs Aug. 12-14. Liberty Fairs’ Fashion and Lifestyle Show in Las Vegas will also run Aug. 12-14, and the NW Materials Show is slated for Aug. 14-15 in Portland, Ore.