NEW YORK — Macy's customers may finally start to feel the impact of President Donald Trump's trade war with China.
Like many department stores and general merchandise retailers, Macy's had been left largely unscathed by the first several rounds of tariffs since they focused more on industrial and agricultural products. But products like furniture saw an increase in tariffs to 25% last week. And now the administration is preparing to extend the 25% tariffs to practically all Chinese imports not already hit with levies including toys, shirts, household goods and sneakers, which furnish Macy's behemoth stores. That's roughly $300 billion worth of products on top of the $250 billion targeted earlier.
Macy's CEO Jeff Gennette told investors Wednesday the higher levies on furniture will have some impact on the department store business, but it can be mitigated. But he says if the potential fourth wave of tariffs are placed on imports, that could mean higher retail prices for both store label and national brands.
"Looking at all those categories and those brands that are included, it is hard to do the math to find a path that gets you to a place where you don't have a customer impact," Gennette told investors.
The escalating trade tensions put a damper on the news surrounding Macy's fiscal first-quarter performance, which smashed Wall Street estimates. Macy's also put up its sixth consecutive quarter of increases in comparable store sales fueled by its robust online business after a three-year sales slump. However, even in a still strong economy, the question is how resilient shoppers will remain in the wake of higher prices. Walmart as well as other major retailers are set to report their quarterly earnings results in the next few days, shedding more light on the issue.
Macy's report offered encouraging news after the department store chain struggled through a weak holiday season. It offered signs that the retooling of its loyalty program and the expansion of its off-price concept are enticing shoppers to buy. The company also delivered another quarter of double-digit increases in online sales.
But in addition to the trade wars, Macy's continues to face challenges.
Like many other mall-based stores, Macy's is under pressure to reinvent itself as shoppers increasingly buy online. Macy's has been expanding its store labels and opening more off-price Backstage stores. It's rolled out technology that allows customers to skip the line at the register. The company's revamped loyalty card program has helped keep its best customers engaged. And after closing more than 100 stores over the past several years, it's going to see how a cluster of smaller stores work with today's customers.