The border tax is a major retail wild card, analyst says

The border tax is a major retail wild card, analyst says
The border tax is a major retail wild card, analyst says

Oppenheimer analyst Brian Nagel doesn't believe the House Republican's proposed border adjustment tax, or BAT, will happen, because of the power of the consumer.

"If [BAT] passed, retailers would have to pass on higher prices to consumers," Nagel said Friday in an interview with CNBC's "Power Lunch." He's labeled the border adjustment tax as the biggest "wild card" for retail this year.

A consumer goods price hike wouldn't play out as smoothly as House Republicans might expect, Nagel said, as consumers are going to have a difficult time making up the difference.

If people would "try to understand the math" involved with BAT, Nagel said, it makes more sense why "it just won't happen."

Nagel used J.C. Penney as an example of a company that would have a hard time making sales with more expensive items. Home Depot, though, wouldn't struggle as much because those shoppers are likely less price sensitive, he said.

Penney's, which reported a disappointing same-store sales drop on Friday, also announced plans to shutter up to 140 stores over the next few months, as well as two distribution centers, according to its earnings release. The company's stock was down nearly 4 percent in midafternoon trading Friday.

Other retail names rallied Friday, including Foot Locker, Nordstrom, Kohl's and Gap, amid reports that President Donald Trump's administration might not be so quick to adopt BAT.

CNBC

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