3 Retail Stocks That Desperately Need a Tariff Break

April 30, 2025 at 08:15 AM EDT

Girls going shopping - stock image

Whether they invest or not, most Americans are getting weary of tariff talk. Beyond the prospect of significantly higher prices, investors are unclear of what level of tariffs will be applied to which country.

For example, China stands to face the largest tariffs. At one point, President Trump threatened the country with 145% tariffs. That’s since been walked back, but the president made it clear that (for now), the tariffs won’t be 0%.

That's a wide range of outcomes for companies to consider. Many retailers went around this by frontloading merchandise in anticipation of tariffs. But that will only stretch so far. This is particularly going to impact apparel companies that have much of their supply chain in China or other Asian countries. Even with that, these companies operate on tight margins that make it impractical to onshore operations.

With that in mind, it’s important to know which retail stocks have significant exposure to China and other Asian countries. That's the case with the three stocks on this list. For that reason, investors may want to wait until, when, and if more tariff details are available before taking a position.

American Eagle May Be Cheap for a Reason

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At a time when many stocks are overvalued, investors can’t say that of American Eagle Outfitters Inc. (NYSE: AEO). The stock trades at a price-to-earnings (P/E) ratio of just 9.14, and its forward P/E is around 6x. Those are low numbers even by the company’s past standards. And the analyst forecasts on MarketBeat give the stock a consensus price target of $15.50, a 45% gain from its price as of this writing.

However, there are times when stocks are cheap for a reason. And this appears to be one of those times. AEO stock is down 33% in 2025 and 55% in the last 12 months. Revenue and earnings have been fine, although growth is slowing. The larger issue is the company’s exposure to Asian countries for its manufacturing. As of April 2025, American Eagle uses 101 factories in China to source its goods. It also relies on 67 facilities in Vietnam as well as other Asian countries.

The good news is that deals are likely with many of these countries fairly soon, with the exception of China. However, with so much exposure to China, the short-term outlook for AEO stock makes it a tough buy.

Levi Strauss May Not Be the Best Fit Right Now

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Levi Strauss & Co. (NYSE: LEVI) had the misfortune of reporting earnings on April 7, 2025, right after the tariff announcement. The company known for its iconic jeans put up solid numbers, and the stock bounced off its 52-week low. But the company’s exposure to Asian nations such as China, Cambodia, and Vietnam put it front and center in tariff talks.

However, like American Eagle, Levi Strauss stock is trading at an attractive P/E ratio that’s far below its historical average. The company also pays a dividend that yields 3.3% as of this writing. The payout ratio of 58% is somewhat elevated, but right now the dividend appears safe.

Analysts give LEVI stock a Moderate Buy rating with a consensus price target of $19.18 which is a gain of 21%. The announcement of a trade deal with a country like Vietnam could be an immediate lift for the stock, but it negotiations take longer than expected, investors should expect longer term downward pressure.

Tariffs Are Only the Latest Headwind for VF Corporation

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VF Corporation (NYSE: VFC) is the parent company of well-known apparel and footwear brands, including The North Face, Vans, Timberland, and Dickies. The stock had been a strong performer among apparel names until February 2025. However, the company is now facing challenges on multiple fronts, starting with declining year-over-year revenue, which may signal that consumers are beginning to pull back on discretionary spending.

VF will be one of the most impacted by tariffs. The company has approximately 600 factories in China and Vietnam. VF will look for solutions, but those will involve countries with lower tariff rates, not moving production back to the United States.

This dual headwind is showing up in recent analyst ratings. While the consensus price of $21.70 would be a gain of over 80%, Citigroup Inc. (NYSE: C), Piper Sandler, and The Goldman Sachs Group Inc. (NYSE: GS) have sharply lowered their price targets in April 2025.

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