These Major Retailers Could Be Next to Issue Tariff Price Hikes

While we wait for the latest Federal Reserve FOMC meeting minutes on Wednesday afternoon and earnings from Nvidia NVDA after the market close, we are digging into quarterly results from Abercrombie & Fitch ANF and Macy’s M.

What we are not seeing is forward movement on formal trade deals on Wednesday, but we are seeing some progress on trade talks, with India offering steep tariff cuts while retaining high duties on some agricultral commodities.

Also, Japan has proposed purchasing potential imports as high as 1 trillion yen ($6.94 billion) worth of U.S. semiconductor products during ongoing tariff negotiations with the U.S. That would be a positive development for our shares of Nvidia and Marvell MRVL, but not something we’re likely to see those companies talk about when they report their earnings on Wednesday night and after Thursday's market close, respectively.

With Abercrombie & Fitch and Macy’s, both companies dialed back their prior bottom-line guidance, with Abercrombie taking its to $9.50 to $10.50 for this year, down from $10.40 to $11.40. Macy’s sees its EPS clocking in this year between $1.60 to $2.00, down from prior guidance of $2.05 to $2.25. What makes this even more of a downshift in guidance is Abercrombie’s delivering April quarter EPS of $1.59 compared to the market consensus of $1.36.

Macy’s also eked out a modestly better April quarter bottom line performance of $0.16 per share, $0.01 ahead of the consensus forecast. In its earnings press release, Macy’s said it reduced its earnings outlook because of higher tariffs, more promotions and “some moderation” in discretionary spending.

We’ll look to see what Abercrombie says on its earnings call on Wednesday morning, but we would be surprised if we don’t hear more of the same. We will also be listening to see what is said about forthcoming pricing action and whether they throw in with the likes of Walmart WMT, Target TGT, e.l.f Beauty ELF and others in raising prices, or Home Depot HD, which said it doesn’t plan to raise prices because of tariffs.

As we collect these comments, we’ll revisit the Cleveland Fed’s Inflation Nowcasting Model, which already shows the headline and core PCE Price Index ticking up in May. Our thinking is that as that moves higher, the more likely the market will need to adjust its rate cut expectations.

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At the time of publication, TheStreet Pro Portfolio was long NVDA and MRVL.