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(Bloomberg) -- Five Below Inc. shares dropped on Friday after the retailer asked vendors to turn away products waiting for shipment in China before they set off for the US, according to a memo reviewed by Bloomberg.
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Shares declined as much as 10% after shipping giant A.P. Moller-Maersk A/S sent a letter to suppliers on behalf of the discount retail chain saying that the company has elected to suspend its cargo shipments, following the US and China tariff impact. It was unclear from the memo if it went out to all Five Below vendors, or a subset.
The Maersk letter says that no containers are to be delivered to the yard starting April 10, and all containers that are loaded must be unpacked and returned to the carrier.
A representative for Five Below didn’t immediately respond to a request for comment.
Steve Madden Ltd., which also has significant China exposure, saw shares decline by as much as 5.3%, compared with a decline in the S&P 500 of less than 1%.
Five Below’s decision to cancel shipments reflects an escalation of the chaos unfolded by the tit-for-tat tariffs between the US and China. On Thursday, the White House clarified US tariffs on China rose to 145%.
China is Five Below’s largest source for merchandise that is imported, the company disclosed in a securities filing last month. The specialty retailer also noted that the “significant majority” of its merchandise comes from outside of the United States.
The tariff increases should pose costs of 90% to 95% for Five Below, said Oppenheimer analyst Brian Nagel. He’d previously estimated costs in the range of 42% to 51% based on the initial tariff announcement Trump made on April 2.
Retailers and other businesses are on edge as the US-China trade war escalates and shipments between both countries drop off.
Amazon Inc. is among a number of retailers — big and small — that have begun canceling orders from China and other parts of Asia. Global container bookings made between April 1 and 8 dropped 49% from the seven-day period immediately before, according to estimates from Vizion Inc., a tech company that gathers supply chain data.
A Maersk spokesperson said the company does not provide any specific individual customer information publicly. “We are in close contact with our customers while they navigate a volatile and uncertain business landscape,” the spokesperson added.