AutoZone (AZO) CEO Philip Daniele has a grim prediction for the future if the incoming presidential administration implements a controversial plan.
The U.S. presidential election, which took place on Nov. 5, resulted in former President Donald Trump being reelected as president as he snagged more electoral and popular votes than his Democratic opponent, Vice President Kamala Harris.
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During his campaign, Trump made many promises to voters, such as large tax cuts for workers, a strict plan to seal the U.S. border, and an end to inflation to “make America affordable again.”
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In addition, Trump vowed to impose tariffs of 60% to 100% on all goods coming from China and 10% to 20% on goods imported from all other countries. He also recently proposed tariffs of 25% on all goods from Mexico and Canada.
In an October interview with John Micklethwait, editor-in-chief of Bloomberg News, Trump claimed that the strong tariffs would “protect” companies.
“You see these empty, old, beautiful steel mills and factories that are empty and falling down,” said Trump. “We’re going to bring the companies back. We’re going to lower taxes for companies that are going to make their products in the USA. And we’re going to protect those companies with strong tariffs.”
AutoZone CEO responds to Trump’s tariff plan
However, one side effect of higher tariffs is higher prices for consumers, and AutoZone is one of the many companies starting to sound alarm bells around this grim reality.
During a recent earnings call, Daniele claimed that if Trump does indeed impose these tariffs when he gets into office next year, AutoZone will have to quickly adjust its pricing.
AutoZone Inc. signage hangs above automotive products and accessories on display for sale at a store in Memphis, Tennessee, U.S., on Thursday, May 17, 2018.
“If we get tariffs, we will pass those tariff costs back to the consumer, and we’ll pass them through,” said Daniele. “As they turn through, we know what the tariffs will be; we generally raise prices ahead of that.”
Daniele’s warning about higher prices resulting from Trump’s proposed tariffs comes after AutoZone’s political action committee donated $15,000 to elect Republican federal candidates during the 2024 election cycle and $0 to Democratic candidates, according to OpenSecrets, an organization that tracks political donations.
Many companies, such as Steve Madden, Walmart, Columbia Sportswear, etc., have also warned that they will increase their prices if Trump implements his plan.
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Trump’s tariff proposal follows the Biden administration’s decision in September to hike tariffs on certain Chinese-made goods, such as electric vehicles, solar cells, steel, aluminum, etc.
In response to concerns about higher prices due to tariffs, Trump emphasized during his interview with Micklethwait that the move would benefit the U.S. economy in the long run.
“The higher the tariff, the more likely it is that the company will come into the United States and build a factory,” said Trump.
AutoZone CEO says consumers are already facing higher costs
During the earnings call, Daniele also acknowledged that the economy has been putting pressure on consumers’ wallets “for the last 20 months,” but the company is betting on repairs to help keep its business afloat should there be a pullback in the retail business.
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“Have we seen the type of inflation that we saw over the last three years? No. Not certainly, not in my lifetime,” said Daniele. “But generally speaking, in tougher economic times, people will generally defer maintenance and discretionary items early in the cycle. And then, as we get further through the cycle, they start to repair their cars because they realize a little investment today” goes a long way.
Despite consumers becoming more cautious about spending, AutoZone appears to be doing well financially.
In its fourth-quarter earnings report for 2024, AutoZone revealed that its net sales increased by 9% year over year.
Its operating profit, or the money the company has left over after expenses, totaled $1.3 billion, a roughly 6% increase from what it reported during the same quarter in 2023.
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