Retail Talks Tariffs, President Threatens More

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Retail Talks Tariffs, President Threatens More

The past week saw several major U.S. retailers report earnings and all mentioned tariffs as affecting performance or citing them as the reason for disappointing performance. Home Depot missed their earnings estimates but maintained their full-year guidance and unlike Walmart said they had no plans to pass tariff related price increases on to their customers (we’ll see). Lowe’s (LOW) beat earnings estimates, just missed their revenue projections and maintained their full-year guidance. TJX (TJX) beat both top and bottom-line estimates and maintained their full-year guidance while cutting their second-quarter projections due to tariffs. Ross Stores (ROST) beat their quarterly expectations but withdrew their full-year guidance and reduced their current quarter projections because of tariffs. Target (TGT) was the worst of the lot as they missed both their revenue and earnings estimates and guided 2025 lower due to weaker discretionary spending, consumer uncertainty about tariffs, and backlash to the company’s rollback of key diversity, equity and inclusion efforts.

In the meantime, the President on Friday threatened Apple with 25% tariffs on iPhones sold in the US but manufactured abroad. Further, frustrated with the lack of pace of trade negotiations, he threatened 50% tariffs on European Union goods which he would start on June 1.

House Passes Massive Spending Bill

The House passed a massive spending bill under the reconciliation rules which means 60 votes will not be needed in the Senate to advance the legislation. The bill which will add $3 trillion to the deficit over the next 10 years, will cause 7 million people to lose Medicaid coverage and will see SNAP benefits cut by 30%. Yields rose sharply this week as the bond market sold off, displaying the market’s discomfort with the added debt.

The Upcoming Week: May 26 – May 30

The week's economic data will be dominated by Friday's Personal Consumption Expenditure release. Other releases of note; April Durable Goods, May Consumer Confidence, the first revision to Q1 GDP, and final May Consumer Sentiment. On the earnings front retail continues to dominate the reporting calendar with Macy's (M), Best Buy (BBY), Kohl's (KSS), and Costco Wholesale (COST) all on the docket. Tech giant Nvidia reports on Wednesday.

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