Tariffs on products from China were dramatically reduced early last week, but smaller companies who source products from that country are still feeling the pain, while some larger, well-capitalized companies see shifting trade policy as a potential opportunity to take market share.
Several publicly traded consumer goods companies recently reported earnings, and executives commented on the impact of tariffs on their businesses and strategies going forward, including On Holdings, Birkenstock, and Clarus Corporation, the parent company of Black Diamond.
SESO also spoke with the CEO of Bogg Bags, a private, smaller company, about how she is changing inventory plans again based on the recent temporary reduction in tariffs on goods from China.
On Holdings Adjusts Sales, Margin Outlook
Swiss footwear and apparel brand On reported better-than-expected results in the first quarter, with net sales skyrocketing by 43% year-over-year to CHF 726.6 million ($826 million), and even increased its sales outlook for the year from 27% growth in constant currency to 28%. But the rapidly growing brand isn’t immune to the uncertainty presented by tariffs and shifting trade policy, and reduced the low end of its adjusted EBITDA margin to 16.5% from 17% and now expects its gross margin to be in the 60% to 60.5% range.
“While we ended the remainder of the year with a lot of tailwind, the ongoing discussions and pending decisions surrounding potential incremental tariffs in the United States introduce a considerable degree of uncertainty into our planning and may create a dynamic market environment,” said CEO Martin Hoffmann on the company’s earnings call last Tuesday. “This includes more volatile foreign exchange rates with nearly all our key operating currencies significantly depreciating in value relative to the Swiss Franc in recent weeks.”
Hoffmann said his team will focus on the factors they can control and will increase prices on select styles in the U.S. starting with the fall/winter season in July. On will remain focused on building the premium sportswear brand with innovation, quality, experiences, sustainability, and social impact, and the company will continue to drive operational efficiencies, Hoffmann said.
Birkenstock Eyes Tariff Opportunities
Birkenstock also shared better-than-anticipated results for the second quarter, reaching €574 million ($639 million) in revenues, a 19% year-over-year increase, or 18% in constant currency. The European footwear brand now expects revenue to grow at the top end of its range, between 15% and 17%, in the year.
Birkenstock is well-positioned to manage tariffs, said CFO Ivica Krolo on its earnings call Thursday, and could even benefit. That’s because:
- Birkenstock manufactures in Europe and 96% of its materials are sourced from Europe, and it has no contract manufacturing in Asia.
- To fully offset tariff impacts, Birkenstock would only need a low single-digit price increase globally, which is consistent with its historical price changes.
- Demand has remained consistent, and pressured consumers will likely prioritize purchasing from brands such as Birkenstock, which executives said has strong brand equity through relative scarcity, over others.
- Other levers include production efficiency, vendor negotiations, optimizing product mix, and allocating products between different regions.
“This, together with our strong inventory position, give us the confidence that we can mitigate the fiscal 2025 tariff impacts,” Krolo said.
“We will navigate through these uncertain times from a position of strength as we have successfully done in the past,” said CEO Oliver Reichert. “Think about COVID, where we came through the challenge stronger than before. And don’t forget about the import tariffs previously imposed by the U.S. administration, which we completely absorbed without any loss of sales. That’s why I am confident today.”
Black Diamond Parent Clarus Withdraws Guidance
Black Diamond was among the first outdoor brands to talk about their price increases to offset tariffs publicly, which were to mitigate the impact of the 10% universal tariffs and the 25% tariffs on aluminum, which they believe will remain in place long-term.
Black Diamond parent company Clarus Corporation reported its quarterly results before the U.S. administration reduced its tariffs on products from China from 145% to 30% early last week. At that time, it called those tariffs “untenable” and withdrew its outlook because of the ongoing uncertainty of that tariff rate.
“While we believe we have effective countermeasures to mitigate a portion of the impact from the tariffs, we cannot predict how these tariffs might affect consumer sentiment and demand, making it very difficult to confidently forecast,” said Clarus Executive Chairman Warren Kanders on the company’s May 8 earnings call.
China represents approximately 25% of the company’s merchandise costs, Kanders said. The company is accelerating its plan to move its sourcing outside of China and expects to be out of that country by the end of 2025.
In addition, Kanders said reciprocal tariffs add another layer of challenges and uncertainty. They have been postponed until July amidst ongoing trade negotiations with various nations.
In terms of the economic impact, Kanders said:
- Clarus estimates, absent any price changes, the impact to Black Diamond would be between $7.5 million and $8 million.
- The pricing actions implemented as of May 5 should reduce that to $3.5 million to $4 million to cover the 10% universal tariff and 25% steel and aluminum tariff.
- Exiting China would reduce this by $1 million to $2 million in the latter half of the year.
“And of course, if there’s a favorable negotiation outcome with China, our exposure would drop proportionally,” he said. “Our primary goal in all of this is to protect supply, fill orders, and possibly gain share as the market shakes out. The silver lining here is a very real possibility that we come through this in an even stronger competitive position.”
Clarus’s sales for the first quarter were $60.4 million, down from $69.3 million year-over-year.
Bogg Bags Scrambles to Recoup Reduced SKUs
For Bogg Bag founder and CEO Kim Vaccarella, the massive tariff rate increase on products from China earlier this spring couldn’t have come at a worse time. Because Mother’s Day makes up approximately 30% of the brand’s annual sales, she decided to pay the tariffs on inventory she’d ordered before those tariffs were announced, which ended up being at various rates over the course of the spring. In some cases, the company took a loss, in others, they broke even, and in other cases, they made a very small margin.
“We didn’t want to be in a position where we didn’t have product to provide, or that we were disappointing our customers that may have already decided to get a Bogg Bag for Mother’s Day,” she said.
Thankfully, the company exceeded its goals for the holiday and had one of its biggest selling days of the year the weekend before Mother’s Day.
But now that tariffs have been reduced, Vaccarella and her team are scrambling to ramp up the scaled back inventory they’d decided on for fall and holiday. Bogg reduced its SKU count by almost 50% for the season, but is now adding some they’d cut because the tariffs are now more manageable.
Ultimately, Vaccarella wants the tariffs to come down further, and more than anything, to have more certainty so she can forecast and plan her business accordingly. And in the meantime, she’s going to continue working on diversifying outside of China.
“Essentially we are figuring out ways that we can learn from these experiences and make our organization stronger,” she said.
Read more recent earnings coverage:
- Columbia Plans to Take Share During Tariff Turmoil, Will Hold 2025 Prices Steady
- Tariffs to Strain Yeti Inventory in 2025; Some New Products to Debut Outside of U.S., Others Delay
Kate Robertson can be reached at kate@shop-eat-surf-outdoor.com.
