Traders work on the floor of the New York Stock Exchange in New York, New York, USA, on 06 May 2019. The Dow Jones industrials lost over 400 points in early trading in as a result of investor unease regarding developments in trade negotiations between the United States and China.New York Stock Exchange, USA - 06 May 2019

With no deal on trade in sight for China and the U.S. and more tariffs in the works, worries are continuing to weigh on stocks and retailers are no exception.

Since May 5 when trade talks between the two superpowers imploded to the surprise of many, some key apparel and footwear companies, singled out by analysts as being most vulnerable to more levies, have seen their share prices slide.

At the top of investors’ minds are the 25 percent tariffs the Trump administration is preparing to place on almost every single Chinese import that has yet to be targeted, including apparent and footwear. Until now, fashion had emerged relatively unscathed in the trade dispute, with the exception of handbags, which have already been hit with 25 percent levies.

Among the retail stocks that have been negatively impacted are PVH Corp., down by 16.7 percent to $105.90; G-III Apparel Group, 33.4 percent to $28.90; Urban Outfitters Inc., 20 percent to $23.98; Ralph Lauren Corp., 17.7 percent to $108.02, and Gap Inc., 17.7 percent to $21.37.

In the footwear sector, Skechers USA Inc. has slid 11.8 percent to $28.23, while Steve Madden Ltd. has shed 17.5 percent to $30.27.

According to analysts at Cowen, Skechers USA Inc., G-III Apparel Group, Carter’s Inc., PVH Corp. and Ralph Lauren Corp. are among the companies in their coverage with “outsized” earnings per share risks.

The first two source the majority of their goods from China, while PVH brings in around $400 million worth of Chinese imports into the U.S.

John Kernan, an analyst at Cowen, said: “Thirty-four percent of apparel imported to the U.S. is from China and 70 percent of footwear. The gross margin hit for some brands and retailers could be several hundred basis points with price increases a deciding factor in overall impact.”

Ike Boruchow, a senior analyst at Wells Fargo, also identified Steve Madden Ltd., Gap Inc. and Urban Outfitters as being particularly vulnerable.

For him, Steve Madden is the most exposed of all the retailers in his coverage.

As discussed earlier in this report, they face a gross headwind of roughly 15 percent simply from the already announced handbag tariffs, and if footwear becomes included we believe the total headwind could be on the order of 70 to 80 percent of total FY19E EPS,” he said in a note to clients.

The new tariffs, on which the paperwork has already been started and are expected to go into action at the end of the summer unless the two sides can reach an agreement, come at a trying time for the retail sector.

The industry has already seen more store closure announcements this year than in the whole of 2018, driven by a combination of disappointing holiday results and many brands rethinking their physical footprint as they beef up their digital businesses in the Amazon era.

Tariffs are expected to push this number up further, with analysts at investment bank UBS warning that the latest set could result in the closure of 12,000 stores and the loss of $40 billion worth of sales. That could be even higher as the research is just based on the 73 companies that UBS analyst Jay Sole covers and does not include the potential impact on privately held retailers’ profit margins.

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