Tariffs on Chinese exports are not impacting daily decision-making at Catalyst Brands, which owns JCPenney, Brooks Brothers, and Aéropostale, but some costs could be passed onto consumers, David Simon, president and CEO of Simon Property Group, told shareholders in an earnings call this week.
- Simon Property Group is a part owner of Catalyst Brands following the merger earlier this month of JCPenney, which it acquired with Brookfield Asset Management in 2020, and SPARC Group, which owned Brooks Brothers, Aéropostale, Lucky Brand, and Nautica.
- Catalyst said it aims to “integrate complementary strengths” among the brands, including in “product design and sourcing capabilities”—an effort that could prove useful in the coming months as the company tries to manage costs.
Simon said Catalyst’s “view with respect to China is that they’ll pass some of it onto the consumer, but also hope that the supplier tightens up the costs of goods sold.” On the upside, Catalyst only sources 20% of their goods from China, he noted, and many retailers have made progress in moving production out of China over the last several years.
- China has announced retaliatory tariffs on some US imports in response to the Trump administration’s tariffs on Chinese exports.
Shoes is one product category that would have been more exposed, Simon said, but Calalyst sold its main shoe brand, Reebok, as part of JCPenney’s merger with SPARC Group.
“Honestly, it hasn't affected our day-to-day decision making,” he said.
Simon also commended another Trump policy: a recent executive order scrapping a provision known as the de minimis exception, which exempted shipments up to $800 from trade duties.
“That’s not a level playing field. That causes retailers to pay more that ship in bulk,” he said, adding that bulk shipments are also greener because they save on packaging.
Cleaning up their supply chain: Meanwhile, CPG brand Clorox is similarly projecting confidence in the face of tariffs. CFO Kevin Jacobsen told analysts that tariffs have not changed its outlook. He explained that much of its portfolio is manufactured close to where it’s consumed, and that it’s done work in recent years to nearshore production.
“Now at the time we did that work, it was really to reduce the risk of our supply chain, but there will be an added benefit here that it reduces our exposure to tariffs,” he said.