Tariffs Impact Footwear and Apparel Industry

As President Trump's tariffs take effect, consumers may face higher prices on footwear and apparel. The executive order imposes duties of 25% on Canada and Mexico and 10% on China, potentially affecting nearly all footwear and apparel sold in the US.

Impacted Companies

Kontoor Brands (KTB), which sources materials from Mexico and Canada, could see a decline in earnings per share (EPS) of approximately 23%. Similarly, Yeti and Warby Parker (WRBY), which sources products from China, could experience a 14% drop in EPS.

Challenges for Retailers

Unlike in 2018, companies have less flexibility to raise prices. Consumers are also more price-sensitive after facing inflationary pressures in recent years. As a result, retailers may hesitate to pass on tariff costs to consumers.

Footwear Industry

The footwear industry relies heavily on imports, with 99% of US footwear sourced from countries such as China and Vietnam. Skechers (SKX) and Crocs (CROX), which source products from China, could see EPS impacts of 9% and 4%, respectively.

Diversification Efforts

Some companies are exploring diversification of production outside of China. However, Vietnam, another major manufacturing hub, may also face tariffs in the future, posing challenges to supply chains.

Mitigation Strategies

Retailers are convening "tariff war rooms" to strategize and implement mitigation tactics. These efforts include forming cross-functional teams, conducting scenario planning, and prioritizing cost-saving measures. Artificial intelligence (AI) is also being considered to automate processes and reduce costs.