Donald Trump’s tariff war is more likely to lead to price cuts than inflation for many retailers in the UK, according to the boss of WH Smith, as east Asian suppliers seek alternatives to the US.Many economists including those atthe Organisation for Economic Co-operation and Development (OECD)have suggested that increased barriers to trade could fuel inflationary pressures across the globe.But Carl Cowling, the chief executive of the retailer, said: “I don’t think there is any logic in why there would be inflation. You could argue it would be the other way around and stock will free up, and it is more likely to be that than inflationary for the UK.”He said the company had not seen any disruption to deliveries from overseas suppliers owing to the rapidly changing news on tariffs. Any changes in sourcing or prices were unlikely to be swift forWH Smithas the group’s stock orders were “locked and loaded” until after Christmas.“We know exactly what product and packaging we are getting, what we are paying and have got orders committed,” he said.He added that trading in the UK was “pretty robust” with airline passenger bookings up slightly year-on-year for this summer and “no softening in numbers at all” in recent weeks despite fears about lagging consumer confidence.But he said retailers “have got to be a bit mobile” to deal with volatile changes in the trading landscape as the US changes the rules on tariffs from China and elsewhere.He said WH Smith’s US business – which operates 258 stores in airports, most of which handle domestic flights – bought the majority of its food and snacks locally.But its suppliers of other products, such as headphones and charging cables, were likely to come from countries in Asia, including China, which are now subject to high import tariffs. Cowling said it was likely that suppliers of these small electronics and other goods could shift production from China to Vietnam, the Philippines or other countries with lower tariffs if necessary.“While we are on top of the detail and mindful of it, I don’t thing we are going to be impacted in the way other retailers [selling, for example] fashion might be,” he said.Cowling’s comments came as WH Smith revealed that profits at its high street business had dived by almost a third, as sales slid 7% in the run-up to its sale to the Hobbycraft owner Modella.The groupagreed to sell its 480 high street storeslast month to focus on its travel business at railway stations, airports and hospitals amid rising costs and falling visitor numbers in traditional retail destinations. The deal is due to be completed this summer.skip past newsletter promotionSign up toBusiness TodayFree daily newsletterGet set for the working day – we'll point you to all the business news and analysis you need every morningEnter your email addressSign upPrivacy Notice:Newsletters may contain info about charities, online ads, and content funded by outside parties. For more information see ourPrivacy Policy. We use Google reCaptcha to protect our website and the GooglePrivacy PolicyandTerms of Serviceapply.after newsletter promotionWH Smith’s high street profits dived by £7m to £15m as sales fell to £239m in the six months to the end of February. However, it said the wider group was on track to produce full-year profits in line with expectations as its travel business, which operates stores in 32 countries, increased sales by a better-than-expected 6% to £712m and profits rose 12% to £56m.Total group sales edged up by 3% to £951m in the half but it made a pre-tax loss of £25m after exceptional items of £70m, including impairment charges.WH Smith said it had agreements in place to open more than 90 new stores, including more than 70 in North America. It expects to open more than 60 travel stores worldwide this financial year.Cowling said its North American business was seeing the benefit of improvements in its stores and product range: “We continue to win new space, and I am delighted to announce that we have recently secured a significant contract at a major east coast airport.“The second half of the financial year has started well, and we remain on track to deliver full-year results in line with market expectations. We are mindful of the increased level of geopolitical and economic uncertainty; however, given the resilient nature of our business, we are well-positioned to benefit from the growth opportunities in global travel retail.”
Tariffs more likely to bring UK price cuts than inflation, says WH Smith boss
TruthLens AI Suggested Headline:
"WH Smith CEO Anticipates Price Cuts Over Inflation Amid Tariff Changes"
The Guardian
8.0
TruthLens AI Summary
Carl Cowling, the CEO of WH Smith, has expressed a contrarian view regarding the impact of Donald Trump's tariff policies on UK retailers, suggesting that these tariffs are more likely to lead to price cuts rather than inflation. While many economists, including those from the Organisation for Economic Co-operation and Development (OECD), have warned that trade barriers could contribute to global inflation, Cowling believes that the situation may allow for greater flexibility in stock sourcing. He noted that WH Smith has not experienced any significant disruptions in deliveries from overseas suppliers as a result of the changing tariff landscape. With stock orders already in place until after Christmas, the company has clarity on its product and pricing commitments, which positions it well to navigate potential challenges in the market. Cowling also pointed out that the trading environment in the UK remains strong, with an uptick in airline passenger bookings and stable consumer activity despite concerns about overall consumer confidence.
In light of the evolving trade dynamics, Cowling highlighted that WH Smith's US operations, which encompass 258 airport stores primarily focused on domestic flights, are largely insulated from the direct impacts of tariffs due to their local sourcing of food and snacks. However, the company may need to adapt its supply chains for other product categories, such as electronics, by shifting production from China to countries like Vietnam or the Philippines that have lower tariffs. Despite a significant drop in profits for its high street division, which saw a 7% decline in sales, WH Smith's travel business is thriving, with a 6% increase in sales and a 12% rise in profits. As the company prepares to sell its high street stores and concentrate on travel retail, it anticipates continued growth opportunities, particularly with plans to open over 90 new stores, including more than 70 in North America, bolstered by a recent significant contract at a major east coast airport.
TruthLens AI Analysis
The article presents insights from Carl Cowling, the CEO of WH Smith, regarding the potential impact of Donald Trump’s tariff policies on UK retail prices. Contrary to prevailing economic forecasts suggesting that increased trade barriers may lead to inflation, Cowling argues that these tariffs could actually result in price cuts for retailers. This perspective highlights a more optimistic view of the economic landscape amidst ongoing trade tensions.
Analysis of Economic Implications
The assertion that tariffs might lead to price cuts instead of inflation challenges the current consensus among many economists, including those at the OECD. Cowling's comments suggest that suppliers from East Asia may seek alternatives to the US market, potentially stabilizing or even lowering costs for UK retailers. This could indicate a shift in global supply chains that might alleviate some inflationary pressures in the UK.
Retail Sector Resilience
Cowling notes that WH Smith has not experienced significant disruptions from overseas suppliers, emphasizing that their stock orders are secured and stable until after Christmas. This resilience in the UK retail sector, as highlighted by rising airline bookings and steady consumer confidence, paints a picture of a robust market despite broader economic concerns. The comment about the need for retailers to be adaptable in response to tariff changes suggests a proactive approach to managing supply chain risks.
Potential Political and Economic Ramifications
The article could be perceived as an attempt to reassure consumers and investors about the stability of the retail sector amidst fears of economic downturns. By emphasizing the possibility of price reductions, it positions WH Smith positively within the market. However, it also subtly hints at the need for vigilance in response to the shifting tariff landscape, indicating that the business environment remains volatile.
Target Audience and Public Perception
This article may resonate more with business analysts, investors, and consumers concerned about pricing trends in the retail sector. By providing a counter-narrative to the fear of inflation, it aims to instill confidence among stakeholders in the UK economy. The focus on WH Smith's adaptability and robust trading positions the company as a leader in navigating these challenges.
Impact on Financial Markets
From a financial perspective, this news could influence investor sentiment regarding WH Smith and potentially other retailers. Positive news about price cuts might lead to increased consumer spending, benefiting stock prices. The broader implications for the stock market could hinge on how other companies respond to tariff-related challenges, particularly those reliant on imports from regions affected by high tariffs.
Geopolitical Context
The article reflects ongoing tensions related to trade policies, particularly between the US and China. By discussing potential shifts in production from China to countries like Vietnam or the Philippines, it touches on the broader dynamics of global trade and economic alliances. This context is relevant given recent discussions about supply chain resilience and diversification in response to geopolitical uncertainties.
Artificial Intelligence Consideration
It is plausible that AI tools were employed in crafting this news piece, particularly in analyzing economic trends and summarizing expert opinions. However, the human touch in presenting Cowling’s insights suggests a blend of AI assistance with editorial judgment. The framing of the article appears to guide readers toward a more hopeful view of economic conditions, which may have been influenced by AI-driven analysis of market sentiments. In conclusion, the article presents a nuanced perspective on the implications of tariffs for UK retailers, specifically highlighting WH Smith's strategic positioning. While it promotes an optimistic outlook, it also underscores the need for adaptability in a changing economic landscape. The reliability of the information hinges on Cowling's credibility and the broader economic data that supports his claims.