IRobot Corp. shares dropped after the company warned that its Roomba autonomous vacuums could be hit with trade tariffs later this year.
“On April 24, the United States Trade Representative granted iRobot an exclusion for its Roomba robot vacuums from Section 301 tariffs through August 7, 2020. The company does not yet know whether an extension for its exclusion beyond the expiration date will be granted,” iRobot said in its earnings release.
US President Donald Trump has used Section 301 of the 1974 Trade Act to impose tariffs on Chinese goods. Roombas are assembled in China. Any extra trade-related costs could increase the price of these devices, or cut into iRobot’s profit margins.
The update cast a shadow over iRobot’s second-quarter results, which beat Wall Street estimates.
Earnings, before certain items, came in at $1.06 a share, up from 48 cents a share a year earlier. Revenue was $279.9 billion, a 8% gain from a year ago. Analysts were looking for 29 cents a share on sales of $265 million.
“While our second-quarter profitability reflects the benefit of our tariff exclusion, we do not yet know whether this exclusion will be extended through the second half of the year,” Chief Executive Officer Colin Angle said. “Nevertheless, we are focused on converting our second-half top-line results and prudent spending into a solid operating profitability and EPS performance.”
The company also gave a bullish sales forecast, suggesting demand for Roomba vacuums and Braava robot mops is growing as consumers stay home and clean more often.
“We are incrementally more optimistic about our second-half revenue growth prospects than we were in mid-June,” Angle said. “Rather than an expected decline in annual revenue, we now anticipate 2020 revenue will be relatively unchanged to slightly higher than 2019.”
In June, the company reported stronger-than-expected orders, and Angle said iRobot was optimistic about the second half of the year. After initially slumping in early March, iRobot shares have more than doubled in recent months.