3 Things to Watch Ahead of Q1 Earnings Season – From Tariff Impacts to Winners and Losers
As earnings season kicks off this week, with Skechers releasing its first quarter results on Thursday, the industry will get a first real peek inside footwear companies’ thoughts on President Trump’s mounting tariffs.
This comes after weeks of whiplash on whether U.S. trading partners would be hit with additional import duties. As of April 9, President Donald Trump reversed part of his plan to impose reciprocal tariffs on U.S. trading partners. Now, the president has placed a 90-day pause on his reciprocal tariff plans, opting for a universal 10 percent rate for all trade partners except China. On April 10, the White House clarified that China’s tariff rate will jump to 145 percent.
And many in the footwear industry are confused and wondering what will happen next.
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In a new note from Williams Trading analyst Sam Poser, he suggests that the tariffs will effect everything from margins, pricing, and demand, and has led the financial firm to lower its estimates and price targets across its coverage.
Some of these moves include Williams Trading downgrading Dick’s Sporting Goods and Shoe Carnival from “buy” to “hold,” Steve Madden from “hold” to “sell,” and upgrading Canada Goose from “sell” to “hold.”
But as the industry unpacks the total impact from the new tariffs in their coming earnings calls, here are three things to keep in mind.
Uncertainty Runs Rampant
Poser said in his recent note that the overall footwear industry “appears somewhat stuck” at this time as it copes with the impact of the tariffs and calls future planning “nearly impossible.”
“The retailers in our coverage appear to be awaiting decisions from the brands before future buying decisions are made,” Poser wrote. “Demand planning will be the key, as far as we’re concerned, and risks to demand are increasing, in the same manner that likelihood of increased inflation is. While the current tariff threats are far different than what happened during Covid, adjusting inventory levels in anticipation of softer sales trends will protect margins, as it did in 2021 and 2022.”
“We would not be surprised if all the companies in our coverage either do not provide forward guidance or withdraw forward guidance,” Poser added.
Change In Inventory Levels
Poser noted that it appears that the additional 145 percent tariff on goods from China has frozen product shipments to the U.S., challenging sales and margin opportunities for those brands that rely on China for its products and do a large percent of sales in the U.S. (Crocs and Steve Madden).
“We also expect that inventory levels in mid 2025 will be very high as companies rush to bring goods into the U.S. ahead of a potential tariff increase after the 90-day reprieve ends for product from countries other than China,” Poser said.
Who Is Best Positioned vs. Who Isn’t
Birkenstock, Hoka, On, and Ugg, are the best positioned brands in the firm’s coverage as they have product people want and continue to improve upon their relative scarcity models, Poser wrote. Skechers is also well positioned due to its compelling value product offerings and its supply chain, he added.
On the other hand, companies like Steve Madden will be the hardest hit from these new tariffs, Poser noted. He wrote that he foresees fiscal 2025 guidance to be slashed or removed as its yearly outlook “has worsened” as 58 percent of its products are made in China, with 80 percent of its revenue comes from the U.S.
VF Corp., which benefit from diverse sourcing, is also slated to take a hit following an investor day in March that failed to lay out a “clear strategy to turnaround Vans,” Poser said. This will now be more difficult as Vans’ wholesale partners are now less likely to take risks on the brand, the analyst added.
