Trade Worries Put Fashion Flops in Harsher Light

It’s been a wipeout of an earnings season across the apparel sector, with dismal first-quarter results from Gap Inc. late Thursday serving as a coda to two weeks of largely downbeat news about the category. Several department stores and specialty chains saw shares hammered on their earnings results or less-than-sunny outlooks. And it was hard for them to blame any woes on a cautious consumer, given that big-box retailers such as Walmart Inc. and Target Corp. had strong results, and category specialists Best Buy Co. and Home Depot Inc. fared just fine.

So what happened? The threat of a new round of tariffs on imports from China that would include clothing was lobbed days before big retailers started to report results, making that issue top of mind for investors. Thus, whenever an apparel or department store reported disappointing results, investors were rightly wondering: If this is the best they can do before customers are facing higher price tags every time they go to the mall – and the grocery store, and the auto body shop, and many other places – how well will they possibly be able to perform under more difficult conditions?