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Blame it on tariffs: CEOs roll out new excuse for bankruptcies
Blame it on tariffs: CEOs roll out new excuse for bankruptcies

Mint

time18-07-2025

  • Business
  • Mint

Blame it on tariffs: CEOs roll out new excuse for bankruptcies

When At Home Group Inc.'s lawyer stood before a US bankruptcy judge last month asking to wipe out nearly $2 billion of the retailer's debt, the reason came quick: tariffs. It's a line that's showing up in more and more courtrooms. Tile importer Mosaic Cos. blamed them in a recent filing. Just weeks earlier, it was auto-parts supplier Marelli Holdings Co. and aluminum trader Sinobec Group Inc. In all, tariffs have been laid out as a key reason in at least 10 bankruptcies in the US since early April, when President Donald Trump first unveiled a new wave of levies, according to data compiled by Bloomberg. But to many economists and analysts, the tariff blame game doesn't hold up — at least not yet. For one, it's simply too early for the latest duties to have made a material impact on corporate performance, especially for companies that typically carry several months' worth of inventory, they say. What's more, recent data showing solid employment growth, rising wages and a persistently low jobless rate signal that the economy is still holding up. It's the latest chapter in a well-worn corporate bankruptcy playbook, where companies pin their collapse on everything from fickle consumers to currency swings — even bad weather — anything but their own missteps. While market watchers say tariffs could eventually push a number of struggling firms over the edge, right now they're seen more as an excuse to paint over deeper problems. 'Companies are struggling, but the tariffs did not put them into bankruptcy,' said Stephanie Roth, chief economist at Wolfe Research. 'Until the labor market starts to crack in a real negative way, there's no great reason to believe that consumers should pull back or that the economy is weakening sufficiently.' Take At Home, which sells everything from patio furniture to rugs to generic wall decor. Its woes began well before Trump's latest round of tariffs. Burdened with a high debt load following its 2021 takeover by private equity firm Hellman & Friedman, the impact of the Covid-19 pandemic on supply chains led to rising costs for material and labor. As consumers shifted to spending more on travel and leisure, waning demand for home goods also dented performance, leading to credit-rating downgrades and a distressed exchange in 2023. Last month, the Texas-based company said it will close at least 26 of its more than 250 stores as part of its bankruptcy. At its Rego Park location in Queens, New York — one that it plans to shutter — customers who braved the summer heat in search of bargains were lamenting its demise. 'I am a little sad to see this one go because it's just so much easier to get something that fits your style,' said Diana Delacruz, 22, who was browsing items at the store's going-out-of-business sale. A representative for At Home declined to comment. For more on corporate distress and bankruptcies, subscribe to The Brink Marelli, the auto-parts supplier, for its part, said in a court filing that it was 'severely affected' by headwinds driven by auto tariffs rolled out by the Trump administration in March. But the company, which provides lighting systems and suspensions to the likes of Stellantis NV and Nissan Motor Co., was already contending with industry upheaval as electrification and automation forced carmakers to shift their strategy to cope with declining sales in key markets. 'The market pressures impacting the entire automotive industry and lower production volumes we began seeing a year ago, long before current tariffs were put in place, were the main issues that constrained our working capital,' Fernando Vivanco, Marelli's chief communications officer, said in an emailed response to questions. Some companies have said that tariffs are just one of a number reasons they've struggled. In its June filing, Sunnova Energy International Inc. said cuts to government subsidies, inflation and higher interest rates were curbing demand for their equipment — while mentioning that the latest tariffs were another hurdle. Prominent names in the sector including SunPower Corp., Lumio, and Meyer Burger Technology AG's US operations have also filed for bankruptcy over the past year. A representative for Sunnova declined to comment beyond the bankruptcy filing. Market watchers say that depending on how current Trump administration negotiations play out, tariffs could ultimately play a much larger role in bankruptcies in the months ahead. Recent economic indicators — consumer spending, retail sales, US factory activity — already show a dent in demand amid the policy uncertainty. The number of companies at the greatest risk of defaulting are at an 11-month high, Moody's Ratings said in a report earlier this week So far, however, the overall damage to companies has been contained. S&P Global Ratings said earlier this month that only 31 credit grade cuts in recent months have been tied to tariffs, less than 1% of its total ratings actions. For now, some say that if plans for a restructuring were already in the works, Trump's levies may have just served as motivation to file for bankruptcy sooner. Some of these 'smell of the private capital people who are adept at using the bankruptcy laws to facilitate a restructure of a business that they want to keep but has an unsustainable debt burden,' said Todd Baker, a senior fellow at the Richmond Center for Business, Law, and Public Policy at Columbia University.

Retail sales jump in June: Consumer is 'powering through'
Retail sales jump in June: Consumer is 'powering through'

Yahoo

time17-07-2025

  • Business
  • Yahoo

Retail sales jump in June: Consumer is 'powering through'

Retail sales rose 0.6% in June, far above expectations, while jobless claims fell for a fifth straight week to 221,000. Wolfe Research chief economist Stephanie Roth joins Market Catalysts to discuss what the strong control group reading means for the consumer and how tariffs and inflation complicate the Federal Reserve's path forward. To watch more expert insights and analysis on the latest market action, check out more Market Catalysts here. got this morning. Retail sales coming in above expectations, rising six tenths of a percent in June. Economists were looking for only a tenth of a percent growth. Initial jobless claims falling for the fifth consecutive week, 221,000 claims was the reading. And back with me on this is Stephanie Maroth, Wolf Research Chief Economist. So we talked a little bit about retail sales earlier, Stephanie, but I did want to dig a little bit further into this because it's an interesting moment right now, because we keep hearing the tariff increases are coming, there's still a little bit of trepidation about economic growth, and then you see a number like that. So how how should we be, like, what does that number really mean? Yeah, I mean, I would I would curb your enthusiasm a little bit about the print. Uh, the headline numbers are influenced by some of the more volatile categories. I would focus on the control group, which came in at a solid 0.5% month on month, but it did have some historical backward revisions. So, I think the message from the consumer right now is they're fine. The consumer is doing okay in light of everything going on. So there's no major sentiment hit as a result of the tariffs. But there are some categories that were, either it's an air pocket, or there's concerns around higher prices. Things like furniture where have been soft and are are still remaining fairly soft. The muted rebound in in autos was a little bit disappointing. But generally speaking, the the bulk of the categories were were just fine. So I I would say the consumer is powering through this. They're they're doing okay. They might start to be a little bit softer just because prices are starting to rise. And we saw that earlier this week with inflation data. And it's a little bit more difficult for the Fed to be cutting in September. Right, interesting. What and why is just spell that out for us. Why it's more difficult for them? Sure. So the Fed is going to be focused on the two sides of their mandate, inflation and employment. So they're going to be looking at the inflation data, which we're now starting to see the tariffs are working their way into the data. And June was probably the first month that we're really likely to see the print the the the the impact of the the tariffs on the data. July and August it should be notably more significant. On top of that, air air travel might be a little bit stronger in the next couple of months because it's been quite weak for quite some time. And then on top of that, the employment side of the mandate is going to be important, too. And that's going to be presumably the the the the key factor here because many were thinking that the unemployment rate was going to be rising throughout the course of the summer. In the most recent print, it actually fell. And I think some of the dynamics here are, sure, sure, you know, the the labor market is is fine. But also, immigration is putting a a sort of a reduction in the labor supply. So now we have fewer workers, and that that sort of puts some downward pressure on the unemployment rate. Related Videos Why tax changes are a 'huge deal' for small homebuilders United CEO is 'adjusting to the new realities' of the industry Novartis CEO on pharma tariffs, raised outlook, competition PepsiCo, Citizens Financial, US Bancorp: Earnings movers Sign in to access your portfolio

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