The Tariff Turnaround
The story: The US and China reached a trade deal that saw both sides temporarily lower tariffs from the prohibitive to the merely painful.
Sigh of relief: The agreement puts to rest – until mid-August, at least – fashion’s worst case scenario. Retailers are now rushing to order merchandise to keep stores and warehouses stocked through the holidays (and paying dearly to do it; trans-Pacific container shipping rates reportedly jumped as much as one-third after the deal was announced).
Damage done: Even if this month’s temporary agreement becomes permanent, fashion will never be the same. A 30 percent tariff on Chinese imports will still require maneuvering to avoid a big hit to profits. For Shein and Temu, for which customers previously paid no tariffs on small shipments, even a reduced rate is a major threat to their American business. And there’s still a couple dozen other countries that need to strike deals of their own before July, when “reciprocal” tariffs kick in.
Mitigating circumstances: The name of the game going forward is tariff mitigation. While for some brands that may mean relocating production and other drastic steps, the same goal can often be reached through a slew of small tweaks.
Stockholm-based Lisa Yang incorporated in the US so the company could import clothes directly, meaning it pays tariffs on what it paid manufacturers, as opposed to the full retail price had the same item passed through its Belgian warehouse first. The denim brand 3sixteen is cutting costs elsewhere to offset tariffs, including swapping some in-person gatherings for virtual meetings. Birkenstock and other brands are spreading price increases across their global business as weak US retail sales indicate American consumers are already close to their breaking point.
Quiet Sustainability
The story: Fashion brands that once defined themselves by their waste-free production methods and anti-consumption campaigns are downplaying their sustainability credentials.
Sustainability fatigue: They’re responding to signals from consumers that they are bored by same-y eco-conscious messaging at best, and at worst assume brands are making it all up. Unfortunately, there’s plenty to back up both sentiments in a category plagued by greenwashing and a lack of reliable data.
Something (else) to talk about: Even brands that walk the walk on sustainability are relying on other tactics to sell their clothes. Eliza Faulkner, a Montreal-based designer, says she consciously rebelled against the “greige” eco aesthetic when she launched her label in 2012, a decision that’s paying off with consumers who still want to look fabulous while saving the planet. Asket, which once plastered a “fuck fast fashion” mural on a wall in Stockholm, now woos shoppers with the tagline “permanent design, obsessively refined.”
If a sustainably harvested tree falls in the forest…: Sustainability can still be an asset – it’s not a big leap to rebrand waste-saving manufacturing processes and well-compensated workers as a commitment to craftsmanship. But it may undermine the cause long-term if nobody knows or cares which brands operate sustainably.
Gen-Z Giveth, and Gen-Z Taketh Away
The Story: Drunk Elephant was a big beneficiary of the “Sephora tween” phenomenon, with Gen-Z and Gen Alpha shoppers snapping up brightly coloured tubs and tubes containing powerful ingredients that were previously a millennial and Gen-X favourite.
Easy come, easy go: Being the poster brand for kiddie skincare had its rejuvenating benefits. But a potent side effect was that Drunk Elephant’s core customers felt a bit silly using the same stuff as their kid siblings, or worse, their kids. When the youth moved on, sales plunged, dropping 65 percent in the first quarter from a year ago, owner Shiseido reported. Founder and chief creative officer Tiffany Masterson is stepping down, Puck reported.
Stay in your lane: It’s tempting for a brand to embrace youth, especially when sales aren’t growing like they once were. Crossing the generational divide requires careful planning, starting with identifying products, or creating new items, to appeal to a new cohort, supported by targeted marketing that doesn’t alienate existing customers (it’s easier than it sounds; given the niche-ified nature of social media, those older shoppers will probably never see Gen-Z-targeted ads in the first place). That’s the approach Coach has taken with its Tabby bag, a relatively new design that took off with Gen-Z organically before the brand leaned into it.
Luxury’s Next Chapter Is Being Written
The story: Burberry reported a 6 percent decline in first-quarter comparable sales. Shares have jumped 20 percent.
Low expectations: The share price move reflects sub-basement expectations for the British luxury brand, which has been struggling to execute a turnaround. The relatively small sales dip was taken as a sign that efforts to stabilise the brand with a focus on popular, high-margin categories such as outerwear, are working.
The big reset: Returning to form is an emerging theme as luxury brands look for creative and commercial paths out of the sector-wide downturn. Last week, Chanel said it was done with price hikes, after doubling the cost of some of its most popular bags over the last five years. That pronouncement came after the brand reported a 4 percent dip in sales for 2024, its first decline since the start of the pandemic.
Heritage and craftsmanship: The other pillar of Chanel’s next phase centres on addressing customer dissatisfaction, after one too many viral TikToks complaining about sky-high prices and middling quality. Burberry’s history and Chanel’s heritage are examples of the sort of intangibles that keep brands front of mind over decades. It’s worth a try, as the marketing blitzes and price hikes that drove record sales and profits in recent years are showing diminishing returns.
A Sneaker Showdown
The story: Dick’s Sporting Goods bought Foot Locker for $2.4 billion, creating a global sneaker retail juggernaut, the latest in a series of blockbuster M&A deals in fashion.
Rapid consolidation: Kith may set the trends, but it’s these two chains that determine what millions of Americans wear on their feet. As separate entities, they were often at the mercy of sneaker brands and rival retailers like JD Sports, with Dick’s generating most of its sales from other categories and Foot Locker’s fortunes sinking along with the dying malls it inhabits. Together, they have few natural predators.
Everybody’s rooting for Nike: Analysts expect the post-acquisition retailers to use their powers for good, at least from the perspective of the category’s biggest brand. Nike is responsible for a majority of Foot Locker’s sales, and Dick’s now has a powerful incentive to help the struggling sportswear giant get back on its feet. Cajoling Nike to send more of its hottest releases Foot Locker’s way would be a start. Everyone else’s fate is less clear; nobody’s kicking Adidas off their shelves these days, but what happens to Puma and other smaller brands is harder to predict.
The competition: Dick’s main competition is JD Sports, the UK-based retailer that owns several US chains (and in November added over 1,000 Hibbett sporting goods stores in a $1.1 billion acquisition). CEO Régis Schultz is taking the merger of his two biggest rivals in stride, telling analysts “If it’s good for the market, it’s good for us.”