Retail is widely believed to be one of the sectors most impacted because the latest round of tariffs target clothing and other consumer goods according to many analysts.
"We still view [Dollar Tree] as a high quality retailer with a well regarded management team ... However, we can't ignore choppy execution at Family Dollar, and our refreshed tariff math ... shows material downside risk to estimates, with [Dollar Tree] among the most vulnerable companies in our coverage," they said.
"Unless the U.S administration gives a waiver to shipments already enroute before the Sep-1st start date or where orders have been placed, theoretically we could see tariff impact on many of the shipments start sooner." "The near to medium term story includes a challenging recipe of using price increases to offset tariffs and SG&A cost pressures, but with added uncertainty now on elasticity and how the consumer will respond to the next rounds of price increases. That, combined with consensus 2020 estimates that embed improving operating margins, and the stock's premium valuation, keeps us on the sidelines," they said in their note to clients.
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