US tariffs punishing US retailers - Bloomberg

As reported by Bloomberg, retailers' fears about margins and rising tariffs are hampering businesses' valuations as firms struggle to grapple with a cost-heavy future.

Key quotes

The S&P 1500 Retailing Index plunged for an eighth consecutive day as the list of quarterly earnings disappointments grew and as Morgan Stanley signaled caution toward softline chains, including The Gap Inc., American Eagle Outfitters Inc. and Abercrombie & Fitch Co. amid swelling worries about rising tariffs.

With today’s drop of as much as 4.1 percent, spurred by shortfalls today at Lowe’s Cos. Inc., Target Corp., TJX Cos. Inc. and Kohl’s Corp., the index’s cumulative eight-day drop is the most since the summer of 2011, and puts it at the lowest level in about six months.

Meanwhile, Morgan Stanley economists argue that should the threat of increased tariffs fail to ease, supply chains aren’t flexible enough to insulate companies and consumers from higher costs. The bank highlights soft-line retailers as a group with particular exposure to China, adding that in a past episode, they weren’t able to pass through higher cotton prices to consumers in 2011-2012.