It's a mess out there.
Let's get to it.
First, let's run through the retail stocks Wall Street says are most exposed to tariffs.
According to a Goldman Sachs retail analyst note, "Among our covered brands and specialty retailers, we believe Yeti (YETI) , Gap (GPS - Get Report) , and L Brands (LB - Get Report) could see the most pressure from an immediate and unmitigated full tariff scenario." The analysts added that departments stores Nordstrom (JWN - Get Report) , Kohl's (KSS - Get Report) and Macy's (M - Get Report) all house products exposed to tariffs. D.A. Davidson & Co. retail analysts see tariff risk with PVH (PVH - Get Report) .
Now, how does an investor protect against this? It's NOT just about steering clear of these names.
Find Companies That Can Mitigate
"We note that several of our covered brands have taken steps to mitigate potential risks, including accelerated inventory delivery on tariffable product (a key driver of YETI's 21% Y/Y increase in inventory reported today), among other actions," the Goldman analysts said. Basically, Yeti was trying as hard as possible to rid of non-tariffed inventory, as some of its products may be exposed to tariffs in the very near future.
Some companies outright move production to other countries like Vietnam, which can be hard to do.
Find Smaller Companies
And yes, you can still stay in retail if you find the space otherwise attractive.
The $7.95 billion market cap Gildan Wear (GIL - Get Report) casual-wear maker is a good "tariff hedge," CFRA analysts wrote in a late May note. Gildan manufactures out of Central America, the Caribbean Basin, North America and Bangladesh, according to its website, so there's no tariff pressure on its cost of goods sold. On the sales side, 90% of its sales have been in North America, with just 4% in the Asia Pacific region, according to FactSet.
Consider Consumer Staples
Consumer staples are largely less economically sensitive than the discretionaries mentioned above are. To the extent any staples must incur higher commodity costs or other costs related to goods sold, they can get away with raising prices.
"Think about food, think about things in your household, think about what you've got in your refrigerator, think about what you've got in your medicine cabinet homes," Corporate Investment Strategist Chris Macke told TheStreet.
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