Giant US retailers mull going private as tariff tensions bite

Several major retailers are currently in talks to sell to investment firms and companies after US President Donald Trump's trade war wreaked havoc on their valuations, writes Reuters. The rapidly-changing tariff announcements left retailers in a limbo and unable to provide earnings guidance amid trade policy instability. Investment bankers think that we could soon see more retailers aggressively pursuing private deals if Trump does not lock down a clear trade policy soon.

Going private is becoming an increasingly attractive option for retailers, as they will become more immune to the unpredictable fluctuations in the market. They can also shield their earnings because they will no longer have to answer to financial reporting requests and other regulatory restrictions.

Public retailers are not overplaying the impact of market turmoil. Shoe company Skechers, acquired earlier this month by 3G Capital, saw its market value dip to USD 7.4 bn in late April, down from USD 11.85 bn in January, one day before Trump announced tariffs against China. Like Sketchers, many retailers manufacture their goods overseas, making them more prone to downsides of tariff announcements.

Some retailers may find going private easier than others because a company structure drastically influences the signing of these agreements. Companies with a single investor or family companies like Skechers don’t need a broad shareholder approval, meaning that public companies with a similar structure in the retail sector could go private sooner than we think.

US tensions with China flared up again shortly after they cooled things off during recent talks in Geneva that led to monetary calming of global markets. The two countries struck a fragile truce to roll back tariffs for an initial period of 90 days. The US’ repeated warnings to its companies to avoid using AI chips manufactured by China’s Huawei provoked the ire of the Chinese who said that such warnings “undermine” the Geneva talks, casting doubts on whether the 90-day truce will continue its full course.

MARKETS THIS MORNING-

Asian markets are mixed in early trading this morning. Japan’s Nikkei is looking at gains of 0.5% and the Kospi is up 1.8%. Meanwhile, both the Shanghai Composite and the Hang Seng are in the red, down 0.1% and 0.3%, respectively.

THE CLOSING BELL-

The DFM rose 0.4% yesterday on turnover of AED 602.4 mn. The index is up 6.7% YTD.

In the green: Dubai Refreshment Company (+14.5%), Amlak Finance (+5.6%) and Al Salam Bank (+1.9%).

In the red: National Industries Group Holding (-7.7%), Emirates Reem Investments (-5.1%) and BHM Capital Financial Services (-2.3%).

Over on the ADX, the index rose 0.2% on turnover of AED 1.3 bn. Meanwhile, Nasdaq Dubai was up 0.5%.

CORPORATE ACTIONS-

IHC extends AED 5 bn share buyback program: International Holding Company (IHC) has received regulatory approval from the Abu Dhabi Securities Exchange to extend its AED 5 bn share repurchase program until 31 December 2025, according to an ADX disclosure (pdf). The program was initially set to run for one year, ending in June, following its announcement in May 2024 and board approval in June.

REFRESHER- The buyback allows IHC to repurchase up to AED 5 bn worth of shares — equivalent to 0.6% of its total share capital — with all repurchased shares to be cancelled. The program aims to enhance shareholder value by increasing earnings per share. IHC has so far completed a first tranche worth AED 1.8 bn and launched a second AED 1.5 bn tranche in March.