The inside of one of Five Below’s existing locations.
Five Below
When it comes to managing the impact of tariffs, retailers don’t have a one size fits all solution.
An analysis of U.S. container data for retailers Abercrombie & Fitch, Best Buy and Five Below show various mitigation strategies. Industry experts say each retailer’s plans reflects the categories they are in and the customers they serve. This means not all retailers will be rushing to import goods, or front-loading, at the same time, from the same countries.
All three companies were contacted by CNBC, but were in a quiet period because of this week’s earnings.
Global trade data provider Panjiva said the diversification of Abercrombie & Fitch’s supply chain is apparent in its container data. The apparel retailer imports from Bangladesh (27%), followed by Guatemala (14%), Vietnam (10%) and China (9%). Other countries in its supply chain include Sri Lanka (7%), Italy (6.2%), Philippines (6.0%), Cambodia (4.7%), Indonesia (3.8%) and India (2.8%). This means the tariffs the company is subject to range from 15% to 34%, with levies on select goods from India rising to 50%.
The benefits of a diverse supply chain
During Abercrombie’s fiscal second-quarter conference call, Chief Executive Fran Horowitz said the company was bringing its “proven playbook” to alleviate the higher costs associated with the tariffs.
“As our teams have demonstrated before, they have a variety of options in our playbook, including shifting global production, enhancing supplier contracts and relationships, managing operating expenses and determining ways to increase [average unit retail] through lower promotions and lower clearance selling,” Horowitz told investors on the call.
According to data from ImportGenius, Abercrombie pulled forward the majority of its U.S.-bound freight during January, with a smaller front-loading period in April when China tariffs were lowered.
Horowitz said Wednesday that the company doesn’t expect to make any broad-based price increases in the back half of the year. Still, tariffs are dealing a heavier blow than expected earlier this year, despite its attempts to source from lower tariff regions. Abercrombie tightened its annual profit forecast, saying it now anticipates a $90 million hit to its margins, up from an expectation of $50 million in levies three months ago. This is primarily due to higher tariffs in Vietnam, Indonesia and Cambodia than it anticipated as well as the tariffs on goods from India spiking to 50%.
Dana Telsey, CEO of Telsey Group said most retailers have avoided the new tariffs so far this year because they had enough inventory in stock or pulled it forward to avoid the higher levies.
Best Buy, which has been vocal on the tariff impact on electronics, pulled forward its freight in June. But compared with the 2024 peak season, the front-loading was more than 50% less in 2025. Best Buy’s peak season was in the spring of 2024 as the company navigated the threat of the International Longshoremen Association strike, which occurred Oct. 1-3, 2024.
The company is less reliant on China, with just 8% of products sourced from there, according to Panjiva. South Korea is its biggest supplier (60%), followed by Vietnam (11%) and Thailand (9%), it said.
What lies ahead
“We expect tariffs to be a bigger headwind in the second half of the year, likely around late 3Q to 4Q, and into next year,” said Telsey. “Discretionary companies have taken actions to mitigate the impact while continuing to deliver the compelling value, quality, and innovation that is essential to brands. The big unknown is the price sensitivity and how the consumer reacts to the pricing environment, and how sensitive the consumer is.”
Bill Simon, former CEO of Walmart U.S., told CNBC that the impact on retailers will vary.
“I feel very confident, retailers like [Walmart, Costco] and Amazon with their large scale and heavy food/consumable business will be able to mitigate, or absorb most or all of the tariff,” he wrote in an email. “Meaning, consumers will not notice the impact.”
“On the other hand, general merchandise heavy retailers, [Best Buy, Target] and others will have a more difficult time managing the impact in the short run,” he said. “They will not be able to absorb the entirety of it. It will take time for them to adjust their sourcing models to mitigate the tariff expenses.”
Best Buy, for example, pulled forward shipments of Samsung gas ovens, microwaves and washing machines as well as LG refrigerators into January, according to ImportGenius, which examined the bills of lading, which are the digital receipts detailing the contents of containers and shippers.
A flexible assortment
Discount retailer Five Below is highly exposed to Chinese tariffs, with 72% of its shipments from this year coming from that country, according to Panjiva. However, it also exports from Mexico (8%), South Korea (7.3%), Vietnam (5%), India (2%), and Singapore (1.4%).
Jerry Storch, former Target vice chairman and CEO of Storch Advisors, told CNBC that Five Below may have an advantage because it can be more flexible with its inventory than Best Buy or Abercrombie, which need to have certain products in its stores.
“Best Buy does not have as much flexibility to adjust its assortment,” said Storch. “They have to have the TV that you want by brand or size. Abercrombie has to have certain jeans. With Five Below, there’s nothing they need to have. They can change their assortment and be opportunistic on what they purchase.”
Even with the majority of products imported from China, the company can shop for the best prices, he said.
“So if the product is a great deal, they feature that product instead,” said Storch. “They can also change their product origin assortment.”
Reviewing the bills of lading for this year, ImportGenius showed Five Below imported more than 168 containers filled with old antique floor mirrors from China into the U.S. There were also iron drums of filtered pure honey from Vietnam, Tonka dump trucks and Littlest Pet Shop Surprise Trio playsets, both from China, as well as Hershey-branded Smores makers, women’s sleep tops and bath sets that contained face cream, cleanser, face mask and pimple patches, as well as holiday decor.
“Retailers are focused on mitigating the impact of tariffs by 1) diversifying sourcing; 2) sharing the cost with suppliers, and 3) raising prices to the consumer,” said Telsey. “Walmart has seen less impact than expected at this point in the year, but noted it anticipates more pressure ahead as it replenishes goods with the new tariffs attached. Tapestry expects to sell through its lower-cost goods in the first half of its fiscal year, and then higher tariff goods will hit in the second half of the fiscal year.”
Storch expects the second half will be better.
“Companies have had more time to adjust,” said Storch. “They’re bringing goods in windows where tariffs are less; they’ve found different sources of supply in some cases, or they’ve been able to negotiate with the vendors and have been able to change order sizes. So while there are certain categories which are heavily impacted by tariffs, all in all, I think we’re going to be just fine.”
The impact of the tariffs will ultimately rest with the consumer, according to Simon.
“The reason we are not seeing much inflation (yet) is that consumers remain in control,” said Simon. “For example, if there is a tariff on bananas, and the retail price goes up 10 cents a pound, and the consumer buys fewer bananas and more oranges (from [Florida] and [California]), there would be no inflation, just a price increase on bananas. Retailers and suppliers would then react to the consumers’ decisions. They have too many bananas and are ready to spoil, so they lower the price of bananas to a level that will sell the stock. This has a long way to play out.”
