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CEO: Ross Stores will hold off on raising prices following new China tariffs

The Market Intelligence Platform


CEO: Ross Stores will hold off on raising prices following new China tariffs

Off-price retailer Ross Stores Inc. is taking a "wait and see" strategy on whether to pass added costs from impending tariffs on Chinese imports to consumers.

The California-based retailer is monitoring how other retailers handle the added costs from the tariffs, their pricing strategies and how the customers react to a potential price hike, Ross' CEO and Director Barbara Rentler told analysts on an Aug. 22 call discussing the retailer's second quarter earnings result.

"We have to kind of watch what they're doing and then see where that puts us because we're clearly not the leader on pricing," Rentler said.

Meanwhile, several retailers including Macy's Inc.and Kohl's Corp. have expressed unwillingness to share the expected costs from the tariffs with customers.

On an Aug. 20 earnings call with analysts, Kohl's CEO Michelle Gass said, "We know that our customers are driven by our value proposition, so we will ensure that our customers continue to receive the value they expect from Kohl's."

The U.S. is expected to enact a 10% tariff on some Chinese imports in September and December. The expected duties will cover consumer products including clothing, footwear, toys, and electronics.

Ross' Group President and COO Michael Hartshorn said, "a good portion" of the retailer's apparel and footwear assortment is sourced from China. However, the exact amount of Ross' merchandise from China remains unclear as executives have declined on multiple occasions to provide specific details to that effect.

As reported, Ross lowered the top end of its earnings guidance for fiscal 2019, reflecting a 3 cents drop attributed to the impending tariffs. The offprice retailer now expects EPS for the full year to be between $4.41 and $4.50, compared to its previous projection of $4.38 and $4.52.

Ross' executives also maintained their previous position that disruption caused by the tariffs has historically created buying opportunities beneficial to off-price retailers.