Target seeks ways around tariffs before raising prices as a “very last resort”

Target’s CEO Brian Cornell said that raising prices to cover President Donald Trump’s tariffs will be the retailer’s “very last resort.”

He made the comment on Tuesday as Target reported weaker-than-expected sales in its first quarter and cut its forecast for the whole year.

Target’s business has struggled compared to rivals known for low prices. NBC reports that Cornell noted the company has “many levers to use in mitigating the impact of tariffs,” from cost trimming to shifting its supply chain.

Last week, Walmart said customers might begin to see some prices climb as soon as this month, because tariffs have created a more “challenging environment to operate in.”

Trump took to his social media platform to demand that Walmart “EAT THE TARIFFS,” adding, “I’ll be watching, and so will your customers!!!”

Major retailers seem to be treading carefully around price hikes after Trump criticized Walmart

“We’ll keep prices as low as we can for as long as we can given the reality of small retail margins,” Walmart told NBC News on Saturday in response to Trump’s post. Days later, Home Depot all but ruled out near-term price hikes, citing its scale and supply-chain arrangements.

Lowe’s barely mentioned tariffs when it reported earnings Wednesday, but said only about 20% of its sales now come from China, after years of diversifying sourcing.

For Target, Cornell stressed that tariffs are just one of a series of “massive potential costs” the company faces. He pointed to consumer uncertainty about the economy and a high-profile backlash after Target scaled back its diversity, equity and inclusion policies. The company had expanded those initiatives after police murdered George Floyd in Minneapolis five years ago this weekend.

Over the past year, Target has rolled out discounts to attract shoppers weary of inflation and has touted plans to expand its third-party marketplace to offer a wider range of items. To handle new trade-policy challenges, it is negotiating with vendors, reassessing its product lineup, and adjusting its foreign supply chain, Chief Commercial Officer Rick Gomez told investors Wednesday.

“Half of what we sell comes from the U.S.,” Gomez said, adding that Target is boosting production in the United States and in other countries outside China, whose exports currently face a 30% import tax.

Target’s stock was trading more than 3% lower late Wednesday morning.

Some major companies that sell products through leading retailers have raised prices or said they’re considering doing so, including toolmaker Stanley Black & Decker, consumer products giant Procter & Gamble, sportswear brand Adidas, and toy maker Mattel.

Mattel, the maker of Barbie dolls, has also faced criticism from Trump, who threatened to slap it with 100% tariffs this month after it signaled that price hikes were on the table.

Bigger companies are at an advantage due to tariffs

The U.S. Chamber of Commerce and small business owners say that tariffs could drive many independent shops out of business, reducing competition and benefiting big corporations.

The National Retail Federation, which represents some of the biggest retailers in the country, has highlighted that risk in its lobbying, noting that “small and medium-sized businesses will be disproportionately affected by the tariffs, with many saying they will have to raise prices or shut down,” it says on its website.

So far, “consumers are still spending despite widespread pessimism fueled by rising tariffs,” NRF Chief Economist Jack Kleinhenz said after retail sales eked out a 0.1% rise in April.

However, even the largest multinational companies aren’t insulated from tariff-driven uncertainty, the NRF and industry analysts say. Like Target, several large firms have revised or scrapped their financial outlooks in recent weeks, unsure how the White House’s trade agenda will affect them.

On the other hand, not every retailer is concerned about tariffs. The parent company of T.J. Maxx and Marshalls beat sales estimates Wednesday and maintained its full-year forecast. The discounter, which buys unsold merchandise from other brands that have already paid tariffs on much of it, said it expects to be able to handle the pressure from higher import taxes.

Sportswear brand Canada Goose, known for its popular winter jackets, also exceeded Wall Street expectations. But it joined the slew of companies pulling their forecasts for the rest of the year, citing an “unpredictable global trade environment.”

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