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On Monday, Piper Sandler released a report examining the effects of the recent tariff actions on various consumer brands. Analysts at the firm provided insights into how these tariffs might influence companies’ costs of goods sold (COGS) and earnings per share (EPS), as well as their ability to mitigate these impacts through pricing strategies. The analysis comes at a crucial time for the retail sector, with companies managing various financial pressures while maintaining growth trajectories.
CHWY and BIRK were highlighted as brands with the potential to manage the tariff impacts effectively. According to InvestingPro data, CHWY’s current COGS stands at $8.39 billion, with a healthy gross profit margin of 29.24%. The company’s exposure to direct foreign sourcing is minimal, primarily affecting its private brands in Hardgoods, which make up less than 10% of COGS. InvestingPro Tips indicate that CHWY holds more cash than debt on its balance sheet, suggesting strong financial flexibility to navigate potential tariff impacts. For deeper insights into CHWY’s financial health and 10+ additional ProTips, explore the comprehensive Pro Research Report available on InvestingPro. Analysts believe that the company could offset the increased costs with less than a 1% price hike. With CHWY’s robust revenue of $11.86 billion in the last twelve months and strong financial health score of 2.86 (rated as GOOD by InvestingPro), the company appears well-positioned to maintain profitability. BIRK, already accustomed to a 10% tariff, would face an additional 20% increase, resulting in an €80M impact. However, due to the brand’s strong market presence and appeal to higher-income consumers, a price increase of around 6% is considered achievable to offset the new tariffs.
Conversely, SHOO and WWW are expected to experience significant challenges. Prior to any tariff mitigation, these companies could see EPS headwinds of approximately 140% and 110%, respectively. To fully counterbalance the higher costs, a 15% price increase would be necessary, which Piper Sandler considers highly improbable given the brands’ value propositions and pricing power. Even if SHOO and WWW could mitigate 75% of the cost increase, they would still face the highest potential EPS downside in Piper Sandler’s coverage, at -35% for SHOO and -27% for WWW.
ONON’s stock experienced a 16% decline, which some might argue is an overreaction considering the brand’s significant exposure to Vietnam, where tariffs are increasing by 46%. Despite this, Piper Sandler believes that ONON has the capacity to largely offset the tariff impact through various measures, including pricing adjustments and supply chain efficiencies.
NKE’s situation is deemed manageable, with anticipated COGS increases of 10% in FY26. The firm expects that NKE could neutralize these additional costs through pricing adjustments, which could also set a benchmark for competitors’ pricing strategies.
WRBY’s limited disclosure on sourcing details makes it difficult to assess the full impact. However, with China accounting for 20% of COGS and the US nearly 100% of sales, a 5% price increase might suffice to offset the tariffs. WRBY’s value proposition is seen as a strength that could help it navigate the increased costs, despite also sourcing from other countries like Japan, Vietnam, and Italy.
Piper Sandler’s analysis indicates that the ability to pass on increased costs to consumers through pricing will be crucial for brands to withstand the tariff pressures. The upcoming back-to-school season and Holiday ’25 are expected to be critical periods for assessing consumer acceptance of potentially higher prices.
In other recent news, Chewy Inc (NYSE:CHWY). reported fourth-quarter results that exceeded expectations for both revenue and EBITDA, according to TD Cowen. The firm maintained its Buy rating on Chewy but slightly reduced its price target to $44, citing an increase in active customers and improved operating leverage. RBC Capital Markets also maintained an Outperform rating with a $42 price target, highlighting Chewy’s increased net customer additions and margin improvements. Meanwhile, CFRA adjusted its price target to $42 from $45, maintaining a Strong Buy rating, and noted Chewy’s potential for expanding profit margins and cash flow.
UBS raised its price target for Chewy to $36 from $34, keeping a Neutral rating, and acknowledged the company’s progress toward sustainable growth despite some mixed results in gross margin performance. Piper Sandler reiterated an Overweight rating with a $40 price target, expressing confidence in Chewy’s strategic initiatives and growth prospects in the pet care sector. Chewy’s guidance for the first quarter has been positively received, with revenue projections surpassing consensus estimates. The company is also expanding its veterinary services, with plans to open additional clinics. These developments reflect a positive outlook for Chewy, with analysts largely optimistic about its future trajectory.
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