Sonos to Take $30M Hit in Fiscal Year '20 Due to List 4A Tariffs
Consumer electronics company Sonos forecasts a $30 million blow to fiscal year 2020 profits, resulting from the 15 percent Section 301 List 4A tariffs that took effect Sept. 1, Chief Financial Officer Brittany Bagley said on a Q4 call Nov. 21. Most of the impact will be in the holiday quarter, she said. Citing “frequent speculation” about trade negotiations, Bagley said, “We are assuming for the purposes of this call that this remains in effect for the full year at 15 percent.” To mitigate tariff exposure, the company is diversifying its supply chain out of China and has accelerated production of U.S.-bound products in Malaysia. That capacity is “ramping up quickly, and we believe we will have largely eliminated the go-forward impact of tariffs by the end of the fiscal year,” Bagley said.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
The CFO credited staff for minimizing the impact from tariffs, which are expected to result in adjusted quarterly EBITDA of $72 million-$82 million vs. $102 million-$112 million excluding tariffs. FY20 revenue is expected in the range of $1.37 billion-$1.4 billion, representing 8 percent to 11 percent growth. Sonos views tariff-related costs as a “one-time” occurrence: “What we're giving you is the net number of what it's costing us to actually pay the tariff,” Bagley said. Regardless of what happens, “when we get into FY21, we will be shipping our U.S.-bound products from Malaysia, and that will get us out of the tariff impact.” On the breadth of Sonos’ plans for manufacturing outside of China, Bagley said that long term, the company is looking to diversify more beyond China and has a “solid and flexible manufacturing strategy.” Short term, “we are prioritizing U.S.-bound manufacturing.”