Walmart, Target among the retail winners from the tariff truce: Wells Fargo - MarketWatch

Walmart Inc. and Target Corp. are among the retail brands that will benefit from the 90-day truce in the trade war between the U.S. and China, according to a Wells Fargo report.

On Saturday, President Donald Trump agreed to postpone a tariff increase to 25% from 10% on $200 billion worth of Chinese goods. The increase was set to go into effect on Jan. 1.

In addition, the agreement puts a halt on tariffs for another $267 billion worth of Chinese imports. The two sides came to an agreement during a meeting of the Group of 20 industrial nations.

“The worst-case scenario, a 25% tariff on all products sourced from China, without mitigation, would have represented a median earnings headwind of 40% for the mass merchants and dollar-store names,” wrote Wells Fargo analysts in a report.

“A 25% tariff on the much smaller current list would have still represented an estimated 10% to 20% headwind for this group, once again before any mitigation.”

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Walmart WMT, +1.13% and Target TGT, +1.94% , along with Five Below Inc. FIVE, +5.19% and Dollar Tree Inc. DLTR, -0.12% , “are most positively leveraged to this development,” Wells Fargo wrote.

Both Walmart and Target warned about the ill effects of tariffs in September.

Other “winners” are Skechers USA Inc. SKX, +4.85% , Steve Madden Ltd. SHOO, +2.33% and Fossil Group Inc. FOSL, +7.04% , which source 60% or more of their goods from China.

“Notably, Steve Madden had become the proverbial ‘poster child’ for tariff risk given that they source over 90% of goods from China,” Wells Fargo said.

Stitch Fix Inc. SFIX, +0.11% also benefits because, as a low-margin business, there’s a high price for any additional costs, Wells Fargo said.

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Fossil shares closed Monday up 7% and Skechers shares were up nearly 5%, while Steve Madden closed up 2.3% and Stitch Fix was up 0.1%.

In the home furnishing sector, RH RH, +6.47% (up 6.5% for the day), Floor & Décor Holdings Inc. FND, +3.56% (up 3.6%) and At Home Group Inc. HOME, +2.28% (up 2.3%) are “most poised for a relief rally,” analysts said.

The National Retail Federation is holding out hope that the tariff delay will lead to a positive resolution.

“Retailers are pleased by this progress,” said NRF Chief Executive Matthew Shay in a statement. “At the same time, uncertainty over the future of Nafta remains. To protect American jobs and critical North American supply chains, the administration should continue to work through the process until a modernized, trilateral agreement is approved by Congress.”

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The Consumer Technology Association said the tech industry paid $349 million more for goods imported from China through September, up 200% year-over-year.

“While China’s restrictive measures should be addressed, tariffs are taxes — and these past five months since the tariffs went into effect hurt U.S. businesses and consumers,” said CTA’s Chief Executive Gary Shapiro in a statement.

“[M]ore than doubling the 10% tariff rate would likely hurt consumers, put several American companies out of business and displace thousands of American workers,” he said.

The SPDR S&P Retail ETF XRT, +1.36% has advanced 4% year to date, the Amplify Online Retail ETF IBUY, +1.66% is up 12.2% and the S&P 500 index SPX, +1.09% has gained 4.4% for the period.

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