The trade war is about to hit consumers where it hurts: their wallets.
On an earnings call with investors and analysts Tuesday, Steve Madden CEO Edward Rosenfeld conceded that the company will raise selling prices on shoes beginning in the new year as a result of the Trump administration’s tariffs on Chinese-made goods.
The company, like many of its competitors, is approaching the mounting cost of Chinese imports with a three-pronged strategy: first, moving production to other countries where possible; second, seeking price concessions from existing suppliers; and third, hiking prices.
Currently, Rosenfeld said, the company produces about 85% of its shoes in China, a number it hopes to shrink to the 60s. “Anything beyond that is really not achievable, I don’t think, in the first year.” While it has shifted some of its supply chain — particularly in handbags — to countries such as Cambodia, that move has come with its own set of obstacles.
“We’ve definitely seen the prices rise significantly in those other countries, and we have run into longer lead times and other challenges,” he said.
Watch on FN
While Chinese footwear factories already operate on slim margins and are feeling the same pricing pressures from U.S. vendors across the board, he said the team has been “pleasantly surprised” by the price concessions Steve Madden has been able to get from its existing suppliers, which are likely bolstered by the company’s scale in that category.
As the brand’s spring collection hits shelves, consumers will likely see shoe prices go up by the mid-single digits, he said. For a pair of the brand’s best-selling Cliff sneakers, for instance, a 5% increase would raise the price from $99.95 to $104.95.
Handbags, which were included in an earlier round of 25% tariffs that went into effect in March, have already seen price increases, though only in the low single digits.
The footwear industry has been sounding the alarm about the impact of tariffs on American consumers for well over a year now. In March 2018, 82 shoe companies — including Nike, Genesco, Under Armour and Shoe Carnival — signed an open letter to President Trump calling attention to the already-hefty tariffs placed on footwear imports.
“Adding even more tariffs on top of this heavy burden would mean higher costs for footwear consumers and fewer U.S. jobs,” the letter read. “Given the price sensitivity of our products, any additional increases in our costs would strike right at the heart of our ability to keep product competitively priced for our consumers.”
That letter has since been followed by several others as Trump has made good on his promise of increasingly higher tariffs on virtually all Chinese-made products.
Steve Madden (the founder of the Steve Madden brand) has been particularly outspoken about the issue, calling the trade war “right out of a dictator’s playbook” in a speech at the ACE Awards in June.
“I don’t mean to get political, but this is an apolitical issue. Tariffs hurt everybody — they hurt employees, manufacturers, retailers. Most of all, they hurt consumers,” he said. “I’ve yet to meet anyone beyond the man in the White House who thinks this is a good idea. Why we are letting protectionism, tribalism and nationalism hurt a thriving global marketplace?”
Of the most recent round of tariffs, dubbed “list 4” and affecting the bulk of consumer goods, the first wave (4A), which took effect on September 1, placed 15% tariffs on an estimated $110 billion of imports, including almost all clothing and accessories and half of the footwear Americans buy from China. Another, 4B, which is scheduled to go into effect in mid-December, will tax about $160 billion in Chinese goods.
Skechers Has a Valuable Defense Against Any US-China Tariff Impact