How significant is the unmitigated tariff impact to FY25 earnings, and what progress has been made to offset ~80% of it?

Answer

1. Size of the “unmitigated tariff impact” for FY 2025

• What the term means – In Traeger’s FY 2025 outlook the “unmitigated tariff impact” refers to the full‑amount hit that the company expects to take from the new tariff (i.e., a customs or import duty) that will be applied to its wood‑pellet‑grill business in the United States.
  
• Why it matters – The company’s Q2 FY 25 results already show a 13.6 % drop in total revenue to $145.5 million and a net loss of $7.4 million. A tariff that is not offset would further compress margins, push earnings deeper into the red, and could jeopardize cash‑flow generation.
  
• Scale of the impact – While the exact dollar amount of the tariff is not disclosed in the release, Traeger’s statement that it intends to offset roughly 80 % of the unmitigated tariff impact tells us the impact is material.
  
  • If 80 % of the impact can be neutralised, the remaining 20 % still represents a non‑trivial drag on FY 2025 earnings.
    
  • Given the company’s current loss of $7.4 million, even a modest $5‑$10 million tariff hit would be a significant percentage (≈ 65‑135 %) of the current loss and would erode any upside from cost‑saving initiatives.

2. Progress Toward Offsetting ~80 % of the Tariff Impact

Key take‑aways on progress

1. Concrete cost‑saving target: The company has set a $30 million annualized cost‑saving objective for Phase 1 of the project. This is a measurable, near‑term metric that can be tracked against the tariff impact.
   
2. Alignment with 80 % offset goal: The $30 M savings figure is deliberately chosen to line up with the ≈ 80 % offset ambition. Assuming the tariff would cost roughly $37‑$38 million (30 M ÷ 0.80), achieving the $30 M savings would indeed neutralise the majority of the tariff’s effect.
   
3. Early execution: The language “expects to offset” indicates that the company believes the Phase 1 savings will be realized within FY 2025—i.e., the project is already underway, not a future plan.
   
4. Strategic focus: Offsetting the tariff is now a primary driver of the FY 2025 financial plan, as reflected in the earnings release. The company is prioritising cost‑reduction initiatives rather than relying solely on revenue growth, which is currently declining.

3. Bottom‑line implication for FY 2025 earnings

• If the $30 M cost‑saving is fully achieved:
  
  • The net loss of $7.4 M reported for Q2 would be reduced (or potentially eliminated) by the offset, moving the company toward a breakeven or modest profit for the full year.
    
• If the tariff impact were left unmitigated:
  
  • The loss could widen by $5‑$10 million (or more), deepening the negative earnings and stressing cash flow.
    

Thus, the unmitigated tariff impact is a significant earnings drag—large enough to threaten the company’s profitability in FY 2025. However, the progress made through Phase 1 of the cost‑saving project, targeting $30 million in annualized savings, positions Traeger to neutralise roughly 80 % of that impact, which should materially protect FY 2025 earnings and help the company return to a more sustainable financial footing.