Ross Stores CEO makes bleak prediction regarding China tariffs and its impact

Ross Stores faces flat sales and declining profits amid tariffs and changing habits, prompting possible price hikes.

Ross Dress for Less is grappling with a serious challenge as its first-quarter earnings for 2025 reveal stagnant sales and a decline in net income.

The discount retailer, facing a shrinking customer base, is contemplating significant adjustments that could affect shoppers in the near future.

For the first quarter, Ross Stores reported flat comparable sales compared to the same period last year, and net income of $479 million, which marked a nearly 2% drop from the previous year.

This decline comes amid a steady decrease in customer visits, with data from Placer.ai showing a 2.7% year-over-year drop in visits per store.

CEO Raises Alarm on Inflation and Tariffs

In a May 22 earnings call, Ross CEO Jim Conroy addressed the troubling figures, attributing the company's weaker performance to both prolonged inflation and a shift in customer buying patterns.

Conroy noted that consumers are increasingly gravitating toward functional items rather than discretionary products. He also highlighted tariffs as an emerging threat to profitability.

The recent 10% tariff on imports imposed by the Trump administration, particularly on goods from China, is already affecting Ross, with over 50% of its products sourced from the country.

Conroy warned that these tariffs, combined with rising inflation, could result in higher prices for consumers in the coming months.

"The volatility of trade policies and the corresponding impact on the economy, the consumer, and our profitability is highly unpredictable," said Conroy. "During these uncertain times, we will focus on what we can control and manage the business conservatively."

Rising Prices Loom as Tariffs Impact Costs

With tariffs expected to remain at elevated levels, Ross is exploring ways to adjust its pricing strategy.

Conroy confirmed that the company will consider raising prices on certain items but stressed that the increases would be strategically planned, depending on whether the item is deemed functional or discretionary.

"We want to be very careful with price increases," said Ross Chief Operating Officer Michael Hartshorn. "We don’t want to be the first one to raise prices, and we want to make sure that we keep our value or pricing umbrella versus mainstream retail."

While Ross aims to avoid a drastic price hike, the company plans to start adjusting prices around June or July this year.

In addition to raising prices, Ross is negotiating with suppliers to manage import costs and is looking into sourcing products from alternative countries, though this shift is expected to take months and will not affect pricing until 2026.

Shifting Consumer Habits

As the prospect of higher prices looms, consumers are already altering their shopping habits in response to anticipated cost increases.

A recent survey by market research firm Numerator found that 83% of Americans are preparing for the impact of tariffs by searching for sales and coupons, delaying purchases, and buying fewer imported goods.

Ross Stores, known for offering discounted prices, is preparing for a challenging period as both the broader economic environment and consumer behaviour continue to evolve.

The company’s strategy in the months ahead will determine how it navigates the turbulent landscape of rising tariffs, inflation, and changing shopping trends.