Voxx ‘Game Plan’ Is to Hike Prices to Offset Higher Costs of Tariffs, Says CEO
Voxx International expects soon to impose price increases to offset the higher costs of Trade Act Section 301 tariffs on Chinese imports, said CEO Pat Lavelle on a Thursday earnings call. Voxx didn't mention plans expressed on previous calls to shift manufacturing of printed circuit boards from contract OEM factories in China to one of its own facilities in Orlando (see 1807110045). Printed circuit assemblies took an especially heavy hit among the 10 percent tariffs that took effect Sept. 24 and are scheduled to rise to 25 percent on Jan. 1 (see 1809180020).
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Most of the products “within the competitive field” on which Voxx plays are sourced from China, but all manufacturers of similar ilk face the same challenges, said Lavelle. “I don't see anybody having a real distinct advantage based on where they're getting their product,” he said. “Most of it comes out of China. So as the tariffs come through, we will adjust our prices, our selling prices, and you'll see increases in prices. That is the game plan.”
Voxx plans to be "allocating more dollars” in support of new products debuting in its premium-audio segment in the fiscal second half ending Feb. 28, said Lavelle. He expects “tariff-related expenses” may lower gross profit “somewhat” in premium audio, but thinks margins “should remain strong and the segment will remain profitable," with year-over-year operating profit perhaps rising by more than half.
The company also is working on “offsetting some of the higher cost” of the tariffs by “gaining efficiencies and managing inventory, storage and freight, and we continue to look for other ways to lower fixed expenses,” Lavelle said. “In line with this strategy,” Voxx will realign its premium audio operations internationally by combining the Magnat, Mac Audio and Heco brands under the Klipsch Group “umbrella,” he said. Doing so will let premium audio operate “as one team in Europe, which will lower fixed costs,” allow for more “advanced R&D” efficiencies and “improve our market position,” he said.