Polo shirts sit on display at the Ralph Lauren store in London, U.K. (Photographer: Chris Ratcliffe/Bloomberg)

Polo Shirts Could Be Caught in Trade War Just in Time for Summer

(Bloomberg) -- The Trump administration’s latest round of Chinese tariffs may spell bad news for the preppiest U.S. summer staple: the Ralph Lauren polo shirt.

The luxury retailer, which sources about one-quarter of its products from China, could see many of its classic apparel items hit by 25% tariffs as the U.S. proposes fresh levies on about $300 billion of goods. Ralph Lauren Corp. makes many of its high-end products in markets like Italy, but some of its Polo and Lauren brands are still made in China.

Polo Shirts Could Be Caught in Trade War Just in Time for Summer

“Think sweaters, polo shirts, some of our footwear,” Chief Executive Officer Patrice Louvet said in an interview after the company reported fourth-quarter results. “As you can imagine, we are working on different scenarios, absolutely.”

Ralph Lauren shares slipped as much as 5.6%, after initially spiking in premarket trading after strong quarterly results. Although profit beat in the quarter, the company’s home market of North America showed weakness.

Polo Shirts Could Be Caught in Trade War Just in Time for Summer

So far, the average U.S. consumer has largely escaped direct impact from U.S. tariffs on Chinese imports, with the previous rounds focusing more on agricultural items like fish and produce. Some consumer-facing products didn’t escape the first rounds, from handbags to furniture, but finished apparel was largely spared -- until now. The proposed list of additional tariffs, released late Monday, includes more than two dozen pages of clothing items alone.

Louvet said the company sees several possible ways to deal with the potential tariffs, including working with Chinese suppliers to drive down costs and further diversifying the supply chain out of China. It has already lowered its dependence on Chinese manufacturers to about 25% from about one-third last year. “We don’t want any market to represent 30% of our sourcing,” he said.

A third option would be to raise prices that shoppers pay, though that’s a last resort. “If we need to reflect some of this in consumer pricing, we will do that,” he said.

©2019 Bloomberg L.P.