IRobot Anticipates Up to $25M in 2019 Tariff Costs Even if Duties Stay at 10%
Though the Trump administration postponed indefinitely raising the 10 percent Section 301 tariffs on Chinese goods to 25 percent, iRobot, even “at the 10 percent level,” anticipates incurring $20 million to $25 million in tariff costs for 2019, Chief Financial Officer Alison Dean said on a Q1 earnings call April 24. IRobot argued unsuccessfully last summer for removing duties on the finished vacuum cleaners it imports from China under the 8508.11.00 tariff line on grounds the duties would hurt the company and that robotic vacuums are not an “industrially significant technology in China.”
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IRobot raised prices Jan. 1 on its i7 and i7 Plus premium vacuums to offset the higher costs of the 10 percent tariffs, Dean said. “If tariffs are increased at some point in 2019, we would likely increase our prices again to offset the incremental tariff costs incurred,” she said. “Should the tariffs be lifted altogether, we would expect to lower prices to their pre-tariff levels. Any change in tariffs would take time to implement as we and our retailers work through channel inventory, and we provide any contractual price change notifications to our partners.”
To mitigate the tariffs’ impact, “we are moving some of our production outside of China and starting with some of our more easy to build products,” CEO Colin Angle said. “China is where we are doing our most advanced work right now.” The company hopes to have a Malaysian production line “running at the end of this year and have our first products coming off the line,” Dean said. It won’t be “meaningful in terms of how many units are being produced in 2019 and when we’ll actually sell those in market,” she said. IRobot shares plummeted 21.6 percent April 24 after Q1 revenue fell roughly 5 percent short of Wall Street expectations, though sales were up 7 percent year over year.