We've got a winner and new champion when it comes to tariffs and mitigation: Five Below (FIVE) . The clever, rapidly expanding Philadelphia novelty store blew the numbers away and talked about how its price increases MORE than mitigated current and future tariffs with China.
We've heard from outfits like Target (TGT) that the tariffs will be de minimis and we heard cheering because of it. Oliver Chen, the smart analyst over at Cowen, made the stock his top idea yesterday in part because tariffs didn't seem to play much of a role at all. They were NAF, not a factor.
As the earnings season for retailers draws to a close, I am beginning to think that how companies talk about tariffs is becoming a defining term going forward because enough people are concerned about perhaps flagging employment here -- and with the inflamed, tense, fluid situation between the U.S. and China, the stability of a recommendation will depend on how tariffs are adjusted.
Here's the way I see it. First quadrant: who is actually benefitting from the tariffs by putting through price increases that stick because of strong demand? The answer? Only Five Below, which is why that stock is set to go to new highs.
Third, who is at the mercy of tariffs? That's clearly Dollar Tree (DLTR) , hence the chaos on its conference call. Do you know that Five Below has a number of $5.50 products now with no push back from consumers? At the same time, it is opening a Ten Below store -- and that, too, seems to be a positive test. Another leg of what was a one-legged stool.
You can't help but wonder how hostage Costco (COST) is. They are pretty cavalier, but they can be because it is a membership call, not as much a price call. I worry about Home Depot as they said only about half of the inventory was mitigated, not enough to give reassurance after what was rare sloppy execution, a weakness that still allowed them to best Lowe's but not by enough.
Perhaps the worst, other than Dollar Tree? Hasbro (HAS) . Even though the stock is up nicely, tariffs were called out as a specific reason why the company missed the quarter. Wednesday night, Mattel (MAT) told me that it had pretty much solved its China problem -- two-thirds of its stock come from there: not enough to do the job but at that low price, it may be a buy anyway.
Finally, there's the ones where things are so screwed up it doesn't even matter. Macy's (M) performed so badly that nobody cared about tariffs. Kohl's (KSS) was so reassuring -- reassuring and wrong --about tariffs that it was just another area where CEO Michelle Goss seemed way too flip. Both stocks got Fs in my book.
One other thought: A special call out to Gary Friedman at (RH) : He's mitigating -- but more important, his clientele isn't focused on price. It's focused on quality.That's enough for him. It's enough for me.