Popular fashion retailer sounds warning on price hikes

The past few years have been extremely challenging for retailers on multiple levels. Not only have retailers been hurt by shifting consumer behavior, but they've also been battling inflation.

In fact, inflation has caused consumer retail demand to shrink, at least for nonessentials.

Consumers can't spend extra money they don't have. And given the cost of groceries, utilities, and other essentials, a lot of people can't afford to be shelling out money for extras these days.

Meanwhile, inflation has been shrinking retailers' margins, causing them a world of pain.

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Retailers can only raise prices so much at a time when consumers are shopping less. So not surprisingly, a number of retailers have been forced to close stores or file for bankruptcy in recent years due to the broad economic environment.

A popular fashion retailer sounds a warning on price hikes.

Image source: Getty Images

Tariffs could lead to higher retail prices

Inflation has been a tough enough problem for retailers. But now, the industry has another challenge to contend with — tariffs.

Just this week, President Donald Trump announced steep tariffs on 14 countries starting August 1. The impacted countries include Japan, South Africa, and Malaysia.

The problem, of course, is that many U.S. retailers source a large amount of goods from countries overseas. If tariffs drive the cost of the goods up, many retailers will have no choice but to pass those higher costs along to consumers.

That could, however, lead to a broad decline in sales and an uptick in retail closures and bankruptcies.

At this point consumers may not just be out of money, but also out of patience. They're unlikely to react well to additional price hikes when they've already been paying up for years.

At a time when so many retailers have been struggling, popular fashion giant H&M has experienced sluggish sales, too.

The retailer did say it’s seeing an uptick in demand for its products to start off the summer season.

But the news out of H&M isn't all good. The company also said it was seeing signs of cautious spending among consumers during these uncertain times.

Worse yet, H&M warned that it may need to raise prices in response to tariffs.

“We are starting to see some competitors increasing prices, and this is something we are of course looking into to ensure we remain competitive,” said CEO Daniel Erver during a company earnings call.

However, H&M did pledge to try to avoid price hikes as much as possible. It said it was ready, as needed, to be flexible with its supply chain — a tactic other retailers are pursuing as well.

Despite a recent uptick in sales, H&M posted weaker-than-anticipated sales during its second fiscal quarter.

The company also warned that it would be looking to close around 200 underperforming stores.

On the flip side, H&M said it's targeting 80 new store openings in the near term, with a focus on markets showing strong potential for growth.

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All told, though, H&M’s approach to tariffs is one that many retailers will be forced to adopt in the coming weeks as the impact of tariff policies become increasingly clear.

Consumers will, unfortunately, need to brace for price hikes and some generally rocky times ahead.