Dive Brief:

• Apparel and footwear retailers could be hit especially hard by president-elect Donald Trump's proposed tax plan, according to a note released on Monday by Wells Fargo retail analysts, which was detailed in a Barron’s blog.

• Through tweets and advisors Trump has promoted a 35% tariff on imports, which would apply to U.S. retailers buying merchandise from overseas manufacturers. The Wells Fargo report found that Carters, Urban Outfitters, Under Armour, Fossil Group and Gap in particular would suffer, after accounting for imports, price and other factors.

• Among those, Gap is the most at risk, because 71% of its merchandise is imported, Wells Fargo analyst Ike Boruchow wrote, yet would find it difficult to raise its prices globally the 10% needed to mitigate that. Without a fix, Gap's earnings would slide from Wells Fargo current estimate of $1.75 per share next year to a loss of 92 cents per share, The Street reports.

Dive Insight:

Trump's tax plan is still very much a mystery, and Boruchow's team acknowledged in the report that it's not yet clear how such tax changes, if implemented, would play out, considering the dearth of details or actual policy, much less permutations or challenges presented by Congress. Trump has explained some of his tax plans on Twitter:

The U.S. is going to substantialy reduce taxes and regulations on businesses, but any business that leaves our country for another country,

— Donald J. Trump (@realDonaldTrump) December 4, 2016

wanting to sell their product, cars, A.C. units etc., back across the border. This tax will make leaving financially difficult, but.....

— Donald J. Trump (@realDonaldTrump) December 4, 2016

these companies are able to move between all 50 states, with no tax or tariff being charged. Please be forewarned prior to making a very ...

— Donald J. Trump (@realDonaldTrump) December 4, 2016

expensive mistake! THE UNITED STATES IS OPEN FOR BUSINESS

— Donald J. Trump (@realDonaldTrump) December 4, 2016

In the report, cited by Barron's, Boruchow wrote,“[G]iven the high degree of imports, and low gross margins, apparel retailers and footwear manufacturers (as well as watch manufacturers) appear to be the most at risk sub-categories in our universe. Importantly, footwear manufacturers do have a slight advantage over apparel retailers (due to their ability to use pricing to overcome the impact), while we view apparel retailers as less likely to successfully pass pricing onto the consumer (category has been deflationary for the past few years).”

The report singled out Gap, which is at risk of having "over 100% negative impact on the company's earnings per share." To reduce such an impact, Gap would need to raise prices by 10% — no easy feat for a retailer that has consistently leaned on promotions as of late amid losing sales and closing stores. 

In November, Gap pointed to healthier margins as “significantly higher than previously expected,” helping offset lost sales and increased logistics costs resulting from a massive warehouse fire in August. Ken Perkins, CEO of Retail Metrics, in a note released in late October, said that Gap “looked to be less promotional this month than it has been in some time.” Yet, in November, the company reported its seventh quarter of declining sales and warned investors that store traffic would continue to fall during the holiday shopping season.