Businesses and economists are concerned about President-elect Donald Trump’s proposed tariffs.
Trump suggested that all US imports would be subject to a tariff of 20% and goods imported from China or other important trading partners could face a duty as high as 60%.
Walmart and Lowe’s, among others, have indicated that they might need to increase prices in the event of these tariffs being implemented.
TJX, the parent company for TJ Maxx Marshalls and HomeGoods, sees opportunity in this disruption.
TJX’s unique business model
TJX is a business that relies heavily on designer brand excess inventory, unlike most of its competitors who rely on heavy overseas production.
Most of these products are sourced from the same source as their original importer, which means that tariffs were paid by them.
TJX can sell products at discounts of up to 60% off standard retail price by using this “opportunistic purchasing” strategy.
Ernie Herrman, CEO of Ernie Herrman Inc. believes that Trump’s tariffs on imported goods will allow the company to purchase discounted products.
Herrman said during a Wednesday earnings call that manufacturers could deliver goods earlier. This could result in more goods being available at lower prices.
Learn from the 2019 Tariffs
TJX is confident because of its experience.
TJX took advantage of the market disruption that resulted from the Trump Administration’s 25% tariff on Chinese products worth $200 billion in 2019.
Herrman said that this period was a “buying chance” of great importance for the firm.
National Retail Federation predicts a similar dynamic this year. They expect a 13.6% rise in November imports compared with last year’s and a 6.1% increase in December.
TJX is able to exploit the situation created by retailers who are rushing to import products before possible tariffs.
The competition is tough
TJX’s outlook is very different from that of its competitors.
Steve Madden is accelerating its plans to move production from China. Walmart and Lowe’s are anticipating unavoidable increases in prices.
Our model is low-priced products every day. Walmart’s finance chief John David Rainey said to CNBC that there will likely be instances where consumers will see their prices increase.
Analysts believe that TJX’s pricing will be competitive, even though it acknowledges some possible price increases.
Neil Saunders is a GlobalData Retail Analyst who told CNN that “even if the prices increase due to tariffs TJX still will be cheaper than other mainstream retailers.”
TJX wants to strengthen its position as the leader of discount retailers by leveraging supply chain disruptions, and its unique sourcing strategies.
TJX is able to grow despite a difficult economic climate, as competitors struggle with increasing costs.
The post TJX Sees Opportunity in Trump’s Tariff Chaos as Rivals Prepare for Price Hikes: Here’s Why may be updated as new information becomes available.
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