00:00It's good news for retail because at the end of the day, their costs will go down.
00:03These tariffs caused unnecessary stress in the supply chains, caused retailers to raise
00:08prices.
00:09It lowered their margins.
00:10So all that is now set to reverse.
00:12We still don't know what the magnitude of this will eventually shape out to be.
00:16You know, there is our analysts here on the government side think that while these have
00:21been overturned, you don't know what else could be added.
00:24So I wouldn't say we go to zero.
00:27That's probably not happening.
00:28But I do think that as these tariffs get overturned and as costs drop for these retailers, we
00:35should see a pickup in margins in 2026 and also a pickup in demand because, you know, the
00:41consumers for a long time, or at least over the last year, have been very concerned with
00:45inflationary pressures and just prices going up.
00:48So all that will help hopefully ease demand, too.
00:51You mentioned prices going up.
00:53Do we know of any companies, any brands that raise prices because of tariffs?
00:57Where they made that link very explicit?
01:00Yes.
01:01Nike was one of the retailers that had explicitly said that it's raising prices, not on everything,
01:07but on goods that were over $100, notably over $150.
01:11They had taken a mid-single-digit price increase.
01:14So prices did go up across retail from tariffs.
01:17They didn't go up 20%, 30%, but they did go up in the single digits, mid to high single digits.
01:23You know, the New York Fed is out with a report recently saying that about 90% of the tariff
01:28costs were born somewhere in the U.S. chain, whether it was the importers, the companies
01:32themselves, consumers, and maybe only 10% by exporters.
01:36Yeah.
01:36Kevin Hassett disputes that, of course.
01:38Yeah, of course.
01:38Of course that he does.
01:40But I'll go with the New York Fed.
01:41They're pretty solid in their numbers.
01:43So from your perspective and the perspective of the retailers, Poonam, how much do you think
01:48like the Nikes of the world kind of took in their margin versus passing along to consumers?
01:55Yeah, I would say that I think there was a shared cost across the tariffs between the
02:01suppliers and the manufacturers.
02:03So it wasn't 90-10.
02:05And I find that hard to believe because if that was the case, a mid-single digit price increase
02:11wouldn't be enough to offset the cost pressures.
02:14It'd have to be higher.
02:15But that said, I do think that, you know, they did see their costs rise and they did try to
02:22offset it not just through price increases, but also through efficiencies within their
02:27organization, whether it was across payroll, whether it was through technology.
02:31You know, we've heard a lot about these AI investments and they've really helped improve
02:35efficiency across the organization.
02:36But we haven't seen that in the numbers.
02:39And my answer to that is it's not in the numbers because it's really just been helping
02:44offset these incremental pressures from tariffs.
02:48We've seen companies like PepsiCo move to cut prices on some of their products, their
02:53snack products.
02:54And I'm not comparing snacks with clothing or sneakers.
02:57But if a company like Nike raised prices because of the tariffs, is there any world in which
03:05it might reduce prices or lower prices because tariffs were removed?
03:09So I think the consumer is expecting prices to go down when the tariffs are removed.
03:14The big question is if prices went up, let's say 10 percent, are they going to come down
03:1810 percent?
03:20That typically doesn't happen.
03:22They don't necessarily drop to the same extent they went up.
03:24But yes, would you have some relief from the cost increases?
03:28Sure.
03:28I think retailers like Walmart that really push the pedal on price much harder and care
03:33about offering that incremental value to their customers.
03:35That's what they stand for.
03:37Those are the retailers that are probably going to push the pedal much harder on price when
03:41they get the relief from tariffs.
03:44So what's just broadly defined right now?
03:47Step back a little bit, Poonam.
03:48Poonam, what's your view of the consumer here based upon kind of the results you've seen
03:52from some of the retail companies you follow?
03:55I think the consumer is stretched.
03:57I think they're under pressure, but they're making choices.
03:59They're being selective.
04:00They're shopping at retailers that offer them convenience, that offer them speed, and that
04:04offer them something differentiated.
04:06And I think that's been the story for a little while now.
04:09I think that continues.
04:09So retailers like Amazon have been doing well because they offer both value, convenience,
04:15free shipping, and they've done well.
04:18Walmart, you know, we heard from, they also did well on their value proposition.
04:21So I think it's those retailers that really stand out in the crowd or those that have a
04:26fashion element, whether it's Urban Outfitters, you know, with just the right assortments that's
04:31attracting these younger shoppers.
04:33They're the ones who are doing well.
04:35What does this mean for furniture companies like Wayfair?
04:40And I recognize that Wayfair doesn't make a lot of its own furniture necessarily.
04:43It's outsourced a lot of that.
04:45But have they been explicit in how much tariffs have hurt them?
04:49Because most of their manufacturing is not done in the United States.
04:53I'm guessing it's done overseas.
04:55It is done overseas.
04:56But I think with Wayfair, it's a little tricky because, as you said, they are a marketplace,
05:00right?
05:00So when you think about Wayfair, they have thousands of suppliers to choose from, or
05:05manufacturers or sellers.
05:06And if the seller wants to make a sale, you know, they can go from one seller who may say,
05:12the sofa is $1,000 and I have a 50% margin on it.
05:15But then there's seller number two who says, well, you know what?
05:17I'll take a 15% margin on it because I want to get the sale.
05:21So the diversity and just the choice that they have on who they bring on board to offer the
05:27compelling prices has helped them offset a lot of these tariff loads that others that
05:32are vertically integrated have to deal with directly.
05:35Poon, we heard a lot of companies and retailers, but just across the economy, talk about shifting
05:42their supply chains to maybe parts of the world that are less encumbered by tariffs.
05:47Have you seen that in the retail space?
05:49Like is Nike making shoes in Vietnam and not China or anything like that?
05:55Absolutely.
05:55The supply chain shift has been going on since the first round of tariffs, actually, and
06:00it's only been pronounced since last year.
06:02We expect supply chains to continue to be diversified.
06:06The only difference with this ruling being overturned is that the urgency has somewhat been
06:12moderated.
06:13So you don't have to be as reactive as you would have been last year.
06:16You can take your time and be more strategic about where you want to be diversified.
06:21But I don't think that just because the tariffs are overturned, now everything will go back
06:27to China.
06:27I think the diversification step up is here to stay.
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