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Bucharest — May 8, 2024 —
With the first quarter earnings season underway, corporations are once again focused on the effect of tariffs and the changing trade landscape. Companies such as Netflix and L’Oréal are providing insights into adjustments and approaches to navigate these challenges. These strategic shifts are crucial for investors. You can learn more from industry experts below.
As the first quarter reporting season unfolds, corporate executives are once again addressing the impact of tariffs, notably in light of President Trump’s “Liberation day” tariff developments. Last earnings season, tariffs were a dominant topic of discussion among corporations.
Key Themes Emerging from Earnings Calls
- Guidance Adjustments: Some companies, like Delta (DAL), are choosing to
pull their guidance
due to the uncertain trade environment. - Safe Havens: Others, such as Netflix (NFLX), are reassuring investors of their stability amidst trade tensions.
- Strategic mitigation: Companies are actively planning and implementing strategies to manage and mitigate the risks associated with the current trade landscape.
Netflix (NFLX)
Gregory Peters, co-CEO, addressed concerns about economic conditions:
We’ve certainly seen periods of challenging economic conditions historically in diffrent countries.and we’ve generally been able to keep that positive flywheel spinning even in those situations. And I think that speaks to … that we are, for many people, a very good value, even as they’re being careful about where they spend.
L’Oréal (OR.PA)
Nicolas Hieronimus, CEO, outlined strategies for managing tariff impacts:
Most of our [consumer] brands, cerave, are manufactured in North America. So what is exported is mostly luxury. … We can take prices up.We have built inventory. And yes,we can relocate some of our productions. But of course, we don’t want to … take any measures on something that might be temporary. So we are watching carefully what’s happening and trying to figure out what will be the end game.
American Express (AXP)
Stephen Squeri,CEO,highlighted the potential impact on small businesses:
I think small businesses are the ones that we would pay a lot more attention to just as … they could be put in a situation and will not be able to compete effectively in the market.
Squeri added that spending remains robust:
as strong as it was last quarter, maybe slightly, slightly stronger, and credit still continues to look really good.
Strategies for Businesses in a Tariff-Heavy Environment
- Price Adjustments: Companies may need to increase prices to offset the cost of tariffs.
- Inventory Management: building up inventory can provide a buffer against potential supply chain disruptions.
- Production Relocation: Some companies may consider relocating production to avoid tariffs.
- Focus on Value: Emphasizing the value proposition of products and services can help maintain customer demand.
FAQ: Tariffs and Corporate Strategy
- What are the main concerns for companies regarding tariffs?
- Increased costs, supply chain disruptions, and potential impacts on consumer demand.
- How are companies adjusting to the new tariff landscape?
- By adjusting prices, managing inventory, and considering production relocation.
- Which sectors are most vulnerable to tariff impacts?
- Sectors that rely heavily on imported goods or export to countries subject to tariffs.
