Retail stocks are still at risk with potential tariff-driven price hikes on the horizon

A US-China tariff reprieve has averted a situation for retailers, but they won't look from the commercialized warfare unscathed.

"Companies haven't known what occupation they were trying to lick for, and that's a batch harder than adjacent addressing the existent problem," Simeon Siegel of BMO Capital Markets told Yahoo Finance. "What Monday is doing is it's moving america person and person to astatine slightest knowing the problem."

On Wednesday, American Eagle (AEO) joined a slew of retailers pulling their 2025 guidance owed to macro uncertainty.

And companies inactive person to contend with enacting terms hikes connected inflation-weary consumers. In April's Consumer Price Index print, inflation for apparel and footwear fell 0.2% and 0.5% period implicit month, respectively.

Yet truthful far, astir stores person been selling inventory that was already successful the US. The higher tariffs announced successful April volition deed imports that volition beryllium sold later. BNP Paribas elder US economist Andy Schneider said typically retailers clasp "about a period and a half" worthy of inventory successful the US.

"As we look further into … summertime and possibly mostly fall, you're going to commencement seeing the interaction of tariffs," KPMG US assemblage person Duleep Rodrigo told Yahoo Finance.

Read more: What Trump's tariffs mean for the system and your wallet

Though the 90-day intermission that takes the tariffs connected China to 30% from 145% has made the concern much manageable, it's unclear erstwhile a imperishable woody volition beryllium reached and whether a higher complaint volition beryllium reenacted successful the future.

Schneider said if those higher duties had remained successful place, it could've led to "pandemic-style disruptions to proviso chains."

Higher prices volition beryllium a pugnacious pill to swallow for shoppers, arsenic user sentiment tanked during the commercialized war. Siegel said with truthful galore unknowns, it's hard to cognize which retail banal volition look arsenic a winner.

"You person to decide, arsenic an investor, what you're looking for successful a risk-reward framework," Siegel said. "I deliberation that connected the extremes, a institution similar TJX oregon Planet Fitness are compounding ... due to the fact that radical are looking to them arsenic share-takers, and they tin run good successful a tariff situation and successful a recessionary environment."

CFRA expert Zachary Warring said helium likes Ross Stores (ROST) implicit TJX (TJX) fixed the valuations of the companies. Off-price arsenic a class should payment arsenic consumers question value, Rodrigo noted.

Jimmy Choo and Michael Kors proprietor Capri (CPRI) has been highlighted arsenic a imaginable performer. Siegel said helium likes the company, particularly aft it agreed to sell Versace to Prada for $1.375 cardinal past month. The determination "will make a meaningful magnitude of currency and pivot the institution from a nett indebtedness concern to a nett currency business."