Trump Tariffs Raise Prices on Apparel and Footwear
Key Points:
- Tariffs imposed on footwear and apparel imported from China, Mexico, and Canada
- Kontoor Brands, Warby Parker, Skechers, and Crocs among companies likely affected
- Retailers face challenges passing on tariff costs to consumers
- Companies explore diversification and automation to mitigate impact
Detailed Summary:
President Trump's tariffs impose 25% duties on imports from Canada and Mexico and 10% on China. These tariffs affect nearly all footwear and apparel sold in the US, which are primarily sourced internationally.
Analysts estimate that Kontoor Brands, which sources significant materials from Mexico and Canada, could see a 23% decline in earnings per share (EPS). Warby Parker and Yeti could experience a 14% drop, while Skechers and Crocs could face impacts of 9% and 4% on EPS, respectively.
Unlike in 2018, companies have limited room to raise prices due to consumer resistance to rising costs. PWC industry leader Ali Furman notes that passing on tariff impacts is not a viable strategy for retailers.
Footwear companies are particularly vulnerable as 99% of US footwear is imported. Skechers CEO John Vandemore acknowledges the need to potentially increase prices to maintain margins.
Some companies have plans to diversify production outside of China, but the country remains a significant manufacturing base. Industry experts anticipate a shift to alternative Southeast Asian locations.
However, tariffs are expected to disrupt supply chains and impact consumer spending on discretionary items. Retailers are forming "tariff war rooms" to develop mitigation strategies.
Artificial intelligence is recommended as a tool to protect margins by automating processes and reducing costs.
Note: This content is for informational purposes only and should not be taken as financial advice.