Following months of uncertainty, President Donald Trump’s 10% tariff on an additional $300 billion worth of Chinese imports — including footwear and other consumer goods — is scheduled to take effect on Sept. 1.
The announcement, which was made last Thursday, put an end to the temporary truce in a yearlong trade war between the United States and China. It came only a day after representatives from Washington and Beijing wrapped up a round of negotiations, with another meeting scheduled for September in the U.S. capital.
Ahead of the fourth tranche’s implementation, major fashion company leaders speak about the impact of more duties on their businesses. (FN will continue to update this list with more comments.)
Percentage of goods manufactured in China: “In 2019, the percentage of our footwear sold in the U.S. from China factories is substantially smaller than the footwear industry as a whole,” chairman, CEO and president Blake Krueger said. As such, the Rockford, Mich.-based company plans to import roughly 3.5 million pairs from China during the last four months of the year.
For 2020, it expects those imports to decline to about 7.5 million pairs for the whole year — or less than 10% of shoes sold by the brand internationally. “We expect a further dramatic decline to approximately 3.5 million pairs in 2021,” Krueger added.
Impact on consumers: In mid-May, following the threat on the fourth tranche of tariffs, president of global operations Mike Jeppesen said, “The ramifications will be significant on the American consumer. Every dollar we pay in duties on imports is passed on in the form of higher prices to the consumer.”
Business strategy: “Over five years ago, the company implemented a strategic action plan to migrate product out of China as part of a broader plan to improve sourcing diversification for our global business,” Krueger said. “We’ve been able to move very quickly because approximately 75% of pairs transitioning out of China are moving to factories owned by existing sourcing partners. A multiyear strategy and continuing aggressive transition plan now puts the company in an excellent position to manage the potential cost impact of higher tariffs on footwear over both the short and longer timeframe.”
Percentage of goods manufactured in China: “The percentage of footwear and ready-to-wear that is made in China today — we do not feel, even if the tariffs were to go to the full 25%, that that would impact our earnings,” said chairman and CEO John D. Idol.
Impact on consumers: “Our intent is to not raise prices,” Idol said. “We think it’s very important that we continue to maintain our pricing strategy that we have both domestically and globally.”
Business strategy: “We believe we have enough opportunity to mitigate some of those issues, as you saw we just did with the increase of the 10% on those categories,” Idol said, with the New York-headquartered company backing its full-year earnings forecast of $4.95 per share. “So we’re comfortable that both in this year and as we move forward, that will not impact our earnings projections.”
Percentage of goods manufactured in China: “A little less than 70%,” said chairman and CEO Thomas W. Florsheim.
Impact on consumers: “As the company sources a significant portion of its footwear from China, this tariff is expected to increase the overall cost of our footwear,” said SVP and CFO John F. Wittkowske. “At this time, the expected impact of the tariffs on the company’s gross margins, results of operations and overall financial statements is unknown.”
However, Florsheim added that the Glendale, Wis.-based group is attempting to mitigate significant price hikes through wholesale price increases and cost reductions from suppliers. “We have very long-term relationships, and the factories in China want to work with us; they understand the situation,” he said. “And so there, we will be able to achieve some price reductions from the factory base.”
Business strategy: “Our inventory levels increased due to an effort to bring in fall footwear due to worries about additional tariffs being imposed on footwear from China,” Florsheim said. “In May, when the threat again became evident, we had discussions with all the factories in China and just tried to pull everything for that we could… We are positioned well so that we don’t get hit with tariffs on product that we’re going to ship this year for the most part.”
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