Barclays_U_S_Retail_Tariff_Impact_Part_6_New_Tariff_Rates_Now_Imply_MSD_HSD_Price_Increases

Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companiescovered in its research reports. As a result, investors should be aware that the firm may have aconflict of interest that could affect the objectivity of this report. Investors should consider thisreport as only a single factor in making their investment decision.Please see analyst certifications and important disclosures beginning on page 57.U.S. RetailTariff Impact Part 6: New TariffRates Now Imply MSD/HSD PriceIncreasesWe update our proprietary Tariff QuikCalc Model for the newtariffs effective 8/7/25. For our coverage, prices need to rise+5% (+3% prior) to fully offset cost impact of +10% (+6%prior). For the subsegment US Apparel Retail, prices need torise in the HSD range.Reach out to request our proprietary Tariff QuikCalc Model here.Tariff Impact Part 6: Updated Impact Implies MSD to HSD Price Increase. We update ourproprietary Tariff QuikCalc Model for the new tariff rates effective 8/7/25. For our broad coverageuniverse, average prices need to rise +5% (vs. +3% prior) to fully offset the tariff cost impact of+10% (vs. +6% prior). However, drilling down to the subsegment US Department Store & ApparelRetail, average prices need to increase in the HSD range to fully offset new tariffs. We use ourproprietary Tariff QuikCalc Model (Figure 6) to reflect the updated Reciprocal Tariff rates for allcountries. China is unchanged at 30% (originally announced in May). Please see theassumptions for new tariff rates (Figure 3). For the Apparel, Accessory, and Footwear sectors,due to their primary manufacturing base in Southeast Asia, we now assume a 15% minimumtariff in this region, while in Rest of World (outside of Southeast Asia), we assume a 10%minimum tariff unless otherwise specified.CY25 and holiday likely to be minimally affected by new tariff rates; CY1H26 will see thegreater impact from incremental tariff. We also note the grace period for goods shippedbefore August 7th and entering the United States before October 5th, 2025, as these goods willnot be subject to the new tariff rates, but rather the pre-existing rates. Most US retailers shouldhave the vast majority of their holiday goods in by that deadline. Thus the carryover impact ofnew tariffs will be in CY1H26, giving retailers sufficient time to adjust pricing higher for spring2026.For our coverage universe, Average Unit Retail ("AUR") increase rises to +5.2% to offsetAverage Unit Cost ("AUC") increase of +10.2%. For most of our coverage, pricing actions areonly just beginning to show up in the market beginning in early July. Our checks show broadimplementation of price hikes align with late July/early August back-to-school floor sets. Withnew tariffs, we expect more price increases building into Holiday and, even more so, into spring2026. Initial margin impacts have already begun at the tail end of 2Q25 with full impact to 2H25.As higher-cost inventory fully flows through, margin pressure sho