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Indiana-based Vera Bradley says China tariffs will derail its recovery

September 4, 2018

Vera Bradley Inc., an Indiana-based maker of purses and backpacks, says President Donald Trump’s next round of tariffs on China could derail its nascent recovery.

It’s been a tough stretch for the company, which has posted declining sales and net income in each of the past five years. But business has improved lately, including profit that beat expectations by a wide margin in its most recent quarter. The company’s shares are up about 17 percent this year.

The potential U.S. levies on another $200 billion of Chinese goods “will have a detrimental effect on our company, costing us jobs and/or burdening our customers with higher prices,” the company’s vice president of global sourcing, Steve Bohman, said in a public comment posted Tuesday.

“We will either have to absorb this and jeopardize the financial health of our company or make significant changes to our pricing policy, instituting inordinate price increases in categories that are already highly taxed with import duty, and with tariffs that could exceed 42 percent,” Bohman said.

Vera Bradley, based in Roanoke, near Fort Wayne, has been moving production out of China, with less than half of its goods originating there today. That’s down from about 95 percent in 2014. Still, about 21 percent of the company’s products can’t viably be sourced elsewhere, according to the letter.

The duties will also wipe out the benefits of the U.S. tax overhaul that cut corporate rates. Bohman predicted the tariffs coming in at “three times the value of our cost savings from the tax reform bill.”

The company declined to provide additional comment.

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