(Reuters) - Shares of At Home Group Inc lost nearly half their value on Thursday after the furniture retailer cut its full-year profit forecast, partly due to an increase in tariffs on goods imported from China.
The home decor retail chain said it would not raise retail prices to offset the 25% tariff the Trump administration recently imposed on goods like furniture, resulting in an increase in costs that would dent the company’s margins this year.
A host of retailers have warned that any new round of tariffs would hurt their business and result in an increase in prices.
“With tariffs now raised to 25%, we have an even sharper focus on collaborating with our product partners to mitigate cost” Chief Executive Officer Lewis Bird said on a conference call with analysts.
Department store operator Macy’s Inc said last month the higher tariffs were already hurting its furniture business.
The company cut its fiscal 2020 adjusted earnings forecast to between $0.67 and $0.74 per share, down from a prior outlook range of $1.02 to $1.08 per share.
Part of the reason why At Home finds it difficult to raise prices is because it needs to get rid-off of excess inventories, left over after an unusually cold start to the year kept customers away from its stores.
Lower-than-expected first quarter sales hurt by bigger markdowns and a more promotional furniture sector also played a part in the lower earnings forecast, At Home said.
At Home also cut its fiscal 2020 gross margin forecast to 29.2% to 29.4%, from a prior outlook of 31.0% to 31.2%.
At Home purchased about 65% of its products from vendors in countries such as China, Vietnam, India, Turkey and Hong Kong, according to its last annual filing.
Shares of the company touched a record low and were set for their worst day ever on Thursday. At Home is set to lose about $400 million of its market capitalization, which stood at just over $1 billion as of Wednesday.
Reporting by Uday Sampath in Bengaluru; Editing by Shailesh Kuber