U.S. retail and consumer goods companies are positioned to avoid major stock price declines despite ongoing trade disputes with China, according to market analysis from early 2019. However, supply chain disruptions and potential cost pressures remain concerns for industry participants.
The U.S.-China trade conflict prompted companies to adjust operations as tariffs on $200 billion in Chinese imports remained at 10% following President Donald Trump's extension of a March 1 deadline for a potential trade deal. Apparel and footwear remained exempt from higher duties, while furniture and accessories faced 10% tariffs.
The S&P 500 consumer discretionary index rose 11.2% in 2019, outperforming the broader S&P 500's 10.6% gain. Analysts attributed this to market optimism about the U.S. economy and temporary relief from tariff escalations. Mona Mahajan of Allianz Global Investors noted the removal of tariff uncertainty lifted market pressure.
Over 70% of U.S. footwear and 84% of accessories originate from China, according to the American Apparel and Footwear Association. Companies like Steven Madden and Newell Brands shifted production to mitigate costs, while ports handled 1.97 million containers in December 2018, a 13.9% year-over-year increase. Forecasts projected 10.7 million containers for the first half of 2019.
Warehouse costs and inventory management remained critical issues. The National Retail Federation warned that advance shipments could strain storage capacities, while retail sales data showed a 9-year low decline in December 2018. Macy's Inc. struggled with inventory issues, its shares dropping 17.7% after cutting 2018 forecasts.
Analysts cautioned that even with tariff rollbacks, production shifts to countries like Vietnam and Bangladesh could drive up costs. Rick Helfenbein of the American Apparel and Footwear Association warned of price increases throughout the supply chain. Crocs Inc. also highlighted operational challenges in adapting to trade policy changes.
Market watchers noted that investors may be underestimating risks despite the optimistic trade deal outlook. Alicia Levine of BNY Mellon Investment Management stated, "All the risks are to the downside now."
