Getting out of China was probably the right move for footwear firms against the specter of a 145 percent tariff rate, but the added costs will mean lower full-year profits.
Most shoe firms pulled their guidance for the year when they posted first quarter earnings results. That was primarily due to uncertainty over tariffs and some question marks about the state of consumer spending going forward — especially if tariff increases meant shoppers would soon see higher prices on store shelves.
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No one knew what U.S. President Donald Trump would do amid the backdrop of escalating reciprocal tariffs, or that there would be a 90-day pause for China tariffs at a temporary 55 percent rate, which reflects the inclusion of previous tariffs stacked on top of the new rate.
On Friday, in an interview with Fox Business, U.S. Treasury Secretary Scott Bessent said, “We set the table” for future tariff negotiations as the conflict between the two countries deescalate following the U.S.-China rare earth minerals trade deal. He said the current tariff rate on China imports to the U.S. is 30 percent. The two countries are expected to continue with trade negotiations through Aug. 12, when the temporary pause is schedule to end.
Meanwhile, footwear firms were quick to find ways to mitigate the tariff impact.
At its earnings call, Academy Sports + Outdoors CEO Steve Lawrence said it pulled forward domestic inventory receipts of evergreen product at pre-tariff prices and reduced inventory receipts to “maintain flexibility” as tariffs and consumer spend evolved over the back half.
Caleres Inc. faced additional costs associated with moving goods and canceled orders related to tariffs. The company’s president and CEO Jay Schmidt noted on the firm’s conference call that operating earnings were pressured in part by “costs to cancel and move inventory,” while adding that the “operating environment has become more challenging.” The company said it expects to have 10 percent or less sourced from China in the back half of 2025, versus its prior guidance of 25 percent or less.
“The daily uncertainty as to the level of these tariffs makes it incredibly hard to plan and predict both short- and long-term impacts to our business,” Crocs Inc. CEO Andrew Rees said during his firm’s earnings call. He said the company has a well-diversified sourcing mix, and that it has done some “very targeted price increases” to mitigate selective issues. For the most part, he said Crocs is in a “wait-and-see mode” as it works on where and how to manage future pricing.
One of the most notable moves came from Steve Madden Ltd., whose company CEO Ed Rosenfeld said in a statement connected to first-quarter earnings: “We are moving swiftly to adapt to the changing landscape, with a focus on mitigating near-term impacts while positioning the company for long-term growth.”
Rosenfeld said in the firm’s fourth quarter earnings conference call in February that the company’s goal is to cut the percentage of goods produced in China dramatically. In moving components from China to other countries, fall production in China for brands such as Steve Madden shoes or Dolce Vita shoes is “going to be virtually nothing,” he told investors in the firm’s first quarter call.
Some apparel production will still be in China, at likely less than 5 percent. In contrast, last year, the company said it sourced 71 percent of its U.S. imports from China, and had expected that number to be in the mid-teens for fall ’25 and mid single-digits in spring ’26. But in moving to other countries, such as Cambodia, Vietnam, Mexico and Brazil, deliveries for those goods will be pushed out by 30 to 45 days.
BTIG equity analyst Janine Stichter wrote in a note on Tuesday that even though lower China tariffs — at 30 percent — provide some relief, the impact will still be felt. That’s due in part to the costs related to all the shifting that was done. And for companies that had already moved out of the region, she noted that they “may find it challenging (or uneconomical) to pivot back immediately.”
Stichter said that in a recent meeting with Steve Madden’s management, the team acknowledged that had tariffs been 30 percent initially, they might not have moved so fast to get production out of the region “given China’s cost and speed advantages.” That said, the analyst described the rapid move out of China “prudent” to mitigate the downside risk of being subject to 145 percent tariffs.
With price increases not yet hitting consumer demand, there’s still risk ahead in the back half as those prices become implemented, Stichter said. She noted that some companies, such as Birkenstock Holding PLC, Boot Barn Holdings Inc. and On Holding AG, have taken into account potential weaker performance for the back half of the year amid looming price increases.
And even though some companies, such as Nike Inc., Crocs and Steve Madden Madden, have started selective price increases, Stichter said more hikes are on the way, with the majority of companies planning to take their price adjustments starting July onward. Most increases are in the low single-digit and medium single-digit range, due to concerns that too high an increase could result in demand destruction.
And while most companies appear to be waiting as long as possible to make their final decisions on pricing, the BTIG analyst said lower tariffs at 30 percent for China and 10 percent for all other countries probably won’t “significantly” impact pricing decisions as “pricing is still likely a necessary lever to offset.”
Separately, and given the lack of clear guidance from Washington, Footwear News found that many companies on their earnings calls were planning on current pause rates to remain in place for the rest of 2025.
