Retail Tariff Pressure Starts to Ease
Four retailers show tariff costs shifting from a margin shock toward a refund question, though exposure has not disappeared.
Tariff pressure eased across four consumer and retail companies this period, as invalidated IEEPA duties began moving into refund uncertainty while margins at several retailers improved from last year's hit. The shift matters because tariff costs had already cut into brand economics at Victoria's Secret & (VSCO) and American Eagle Outfitters (AEO), while Ross Stores (ROST) had warned that China-linked sourcing left profitability exposed.
Victoria's Secret captured the turn most directly: IEEPA tariffs were struck down and CBP was directed to refund amounts already collected, though the company had recorded no receivable by May 2, 2026 because the amount and timing remained uncertain. The retailer still carried the prior damage, with tariffs net of mitigation reducing fiscal 2025 operating income by about $85 million and first-quarter 2026 operating income by an incremental $14 million from a year earlier. Even so, first-quarter 2026 operating income rose to $76 million from $20 million, helped by higher net sales and improved merchandise margins after first-quarter 2025 gross profit had been pressured by transportation costs and tariff-related order adjustments.
American Eagle showed the same easing in operating results while keeping the policy risk alive. The company said the Supreme Court ruling struck down the IEEPA 10% global baseline tariff and higher tariffs on certain trading partners, while other tariffs remained and future duties could still be imposed through other authorities. Its first-quarter fiscal 2026 gross profit rose 41% to $456 million, gross margin expanded 860 basis points to 38.2% of revenue, and operating income improved to $28 million from an $85 million operating loss a year earlier, after fiscal 2025 tariff costs had weighed on brand margins by $44 million at American Eagle and $26 million at Aerie net of mitigation.
Ollie's Bargain Outlet Holdings (OLLI) turned the legal reversal into a balance-sheet question, disclosing that CBP launched a refund-claims platform in April 2026 while the company had recognized no potential refund by May 2, 2026 because timing and amount were uncertain. Ross, meanwhile, kept the sector's residual exposure in view: more than half of the goods it sells originate from China, yet first-quarter fiscal 2025 cost of goods sold improved slightly to 71.8% of sales from 71.9% and operating income held stable at 12.2% of sales despite fluctuating tariff levels.
The common thread is a retail margin headwind losing force before it fully leaves the income statement.
Source: company public filings.