BofA Securities Warns Tariffs Could Still Weigh On Retail Stocks Such As Gap, Ralph Lauren

Core Viewpoint - BofA Securities highlights rising caution in specialty retail and department store stocks due to tariff concerns, despite solid first-quarter earnings [1] Group 1: Earnings and Market Sentiment - First-quarter earnings were solid, and consumer resilience was noted, but management teams are increasingly uneasy about the second half due to tariff uncertainties [2] - The caution is reflected in conservative sales outlooks across the sector, with a shift in focus towards tariff policy as earnings season concludes [3] Group 2: Tariff Impact and Production Shifts - Most specialty retail and department store stocks have priced in current tariffs of 10% and 30% from China, with further increases potentially leading to significant cuts across the group [1] - Apparel and footwear brands have moved much of their production out of China, making Southeast Asia a new area of concern [3] Group 3: Company-Specific Insights - Ross Stores, Inc. has withdrawn guidance, which analysts view as overly cautious rather than a negative signal [6][7] - Gap, Inc. faces a projected 150 basis-point margin hit in the second half, indicating limited room for price hikes, which aligns with its budget-conscious customer base [7] - Levi Strauss & Co. is expected to see tariff impacts on gross margins starting in the third quarter, while Ralph Lauren Corp anticipates a more significant impact in the second half [7]