Container Store, Ralph Lauren Warn of Trade War Harm in Filings

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By Alexandra Semenova

The Container Store and Ralph Lauren are among companies warning investors that looming tariffs may have negative effects on their financial performances.

Both corporations cited the threat of a trade war as a risk for investors in their corporate disclosure forms amid the Trump administration’s announcement that it is proceeding with its proposal to impose a hefty tariff on goods from China.

“Even the discussion of a trade war is likely to add extra cost to a retail supply chain,” said David French, senior vice president for Government Relations at the National Retail Federation. “By in large, if there were countries other than China where retailers can source these products that were cheaper they would have already been sourcing them there.”

The White House announced May 29 it would follow through on plans to impose a 25 percent levy on $50 billion worth of Chinese goods, raising the risk of retaliatory tariffs. The U.S. receives more imports from China than any other country.

“The current United States presidential administration has made statements and taken actions that signal a change in trade policy between the United States and other countries, including China,” the Container Store wrote in its yearly financial report released May 31. “Because a large portion of our merchandise is sourced, directly or indirectly, from outside the United States, major changes in tax policy or trade relations, such as the disallowance of income tax deductions for imported merchandise or the imposition of additional tariffs or duties on imported products, could adversely affect our business, results of operations, effective income tax rate, liquidity and net income.”

Ralph Lauren issued its warning May 23 in its Form 10-K, ahead of the decision to impose the tariffs.

“Although we are actively reviewing options to mitigate this risk, including diverting production to other countries, there can be no assurance that we will be able to offset any increased costs through pricing actions or other means,” the company wrote in its statement.

Other retailers were ramping up for the proposed tariffs before the official announcement. Pier 1 Imports warned investors early May in its Form 10-K of price increases for consumers if the administration followed through with its proposed tariffs.

Retail is not the only industry bracing itself for the effects of raised costs of imports. Manufacturers have expressed concerns over potential trade barriers.

“Any threat of trade creates uncertainty,” said Nate Herman, SVP of Supply Chains at the National Association of Manufacturers. “Things that disrupt value chains, like timely delivery and cost, can be impacted.”

RBC Bearings Inc., a manufacturing company, listed in its annual financial report May 31 that the increased cost and decreased supply of raw steel and aluminum material as a result of the tariffs may hurt its profitability.

“It’s a really fluid situation right now,” Herman said.

To contact the reporter on this story: Alexandra Semenova at asemenova@bloomberglaw.com

To contact the editor responsible for this story: Seth Stern at sstern@bloomberglaw.com

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