Nation & World

Tractors, sweaters could feel the pain

Deere, Apple, retailers exposed in tariff fight

Deere & Co.

JPMorgan cut its rating on Deere and Co. due to worsening conditions for farmers because of the trade war’s effects.
Deere & Co. JPMorgan cut its rating on Deere and Co. due to worsening conditions for farmers because of the trade war’s effects.

Deere and Co. and Ralph Lauren were among companies facing fresh U.S.-China trade war worries on Tuesday.

JPMorgan cut its rating on the Moline, Ill.-based equipment maker due to worsening conditions for U.S. farmers, while Ralph Lauren’s CEO fretted about “sweaters, polo shirts, some of our footwear.”

Cellphones, toys, game consoles and printers were included in a fresh tariffs list released on Monday, and the likes of Hasbro and Western Digital may be hurt.

Here’s a look at some newly exposed U.S. companies:

Mobile phones

Apple tops the list of U.S. companies that face the biggest impact, as it relies on Chinese labor for the production of nearly all its devices, including iPhones. That product line alone contributed more than half of Apple’s revenue in the quarter that ended on March 31.

A 25 percent tariff would cost Apple nearly a quarter of its estimated profit in fiscal 2020, Morgan Stanley said in a research note last week. If Apple chose to pass on the higher cost to customers, the price of an iPhone XS would jump by about $160 and hurt demand, analysts led by Katy Huberty wrote.

Retail

Ralph Lauren sank to the lowest intraday since January after fourth-quarter total comparable sales missed estimates and amid fears U.S.-China trade tensions will hit the apparel maker’s products, including its iconic polo shirts.

Retailers may face earnings-per-share declines of 10 percent to 30 percent or worse, Cowen’s Oliver Chen wrote in a note, as they’re “unlikely to be able to pass on all of potential cost of goods sold increases.”

Cowen flagged L Brands, American Eagle Outfitters and Gap in the specialty space.

On the other hand, so-called value-oriented retailers may benefit from trade tension as shoppers get increasingly squeezed. That may help Walmart, Costco Wholesale and Target, along with Burlington Stores, TJX Cos. and Ross Systems.

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Planet Fitness may get a boost too with “more consumers preferring deep value given its affordable membership.”

Goldman’s Christopher Prykull reiterated buy ratings on Dollar Tree and Five Below as near-term earnings-per-share impacts may be priced in.

Video games

Console tariffs probably will dent sales of Sony’s PlayStation, Microsoft’s Xbox and Nintendo. Video game makers such as Activision Blizzard, Electronic Arts and Take-Two also could see revenue suffer as a result.

Nvidia Corp. and Advanced Micro Devices, which make graphics processors used in gaming machines, also may be affected.

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