Major U.S. retail companies announced their Q2 2025 (May-July) earnings, revealing the gradual emergence of price pass-through effects from tariff increases. While supported by strong back-to-school shopping seasons, companies are scrambling to develop response strategies.
Best Buy: Strong Back-to-School Season but Cautious Outlook
Electronics retailer Best Buy announced on August 28 that comparable store sales grew 1.6% year-over-year, unexpectedly marking the first positive growth in three years. This strength was driven by:
- Success in back-to-school shopping through sales events
- Replacement cycle for computers purchased during COVID
- Sales of Nintendo's new gaming console "Nintendo Switch 2"
However, the company imports most products from China and has already raised prices on some items. While calling price increases a "last resort," the company plans to address demand slowdown through enhanced manufacturer cooperation and focus on new product sales. Full-year comparable sales guidance remained at 0.1%-1.0% growth, leading to stock price decline.
Abercrombie & Fitch: Tariff Burden Exceeds Expectations
Casual apparel brand Abercrombie & Fitch (announced August 27) reported lower profits, though its teen brand "Hollister" achieved record sales growth of 19% year-over-year driven by back-to-school demand.
With major production bases in Southeast Asia and India, the company faces tariff impacts far exceeding initial estimates:
- Initial estimate: $50 million burden
- Revised estimate: $90 million burden (1.8x increase)
The company is considering production base shifts, supplier relationship strengthening, and average price increases to maintain profit margins.
Five Below: Benefiting from Tariff Policy
Discount chain Five Below is an exceptional case actually benefiting from tariff policy. August 27 earnings showed:
- Sales: 23.7% increase year-over-year to $1.027 billion
- Operating profit: 26.2% increase to $52.36 million
This success stems from the Trump administration's elimination of de minimis rules for Chinese imports. This made it difficult for competing Chinese e-commerce platforms (like TEMU) to maintain their business models, giving Five Below a competitive advantage in maintaining relatively low prices.
Additionally, the company successfully reduced customer resistance to price increases through Disney collaboration products.
Future Outlook
While price pass-through from tariffs is becoming unavoidable in U.S. retail, impacts vary significantly by company. Factors including China import dependence, product categories, price points, and competitive environment create diverse tariff impacts and response strategies.
Companies are pursuing multifaceted approaches including supply chain restructuring, product mix optimization, and value enhancement to mitigate tariff impacts. The success of these efforts will continue to determine corporate performance.