Fashion industry's winners and losers in the Trump’s era

Merely weeks away from the President-Elect Donald Trump's inauguration - scheduled for Friday January, 20 2017 – FashionUnited reviews what companies start to be perceived as winners and losers in the 45th President of the United States’ era.

Regardless their political preferences, retailers have closely followed the presidential election, as key issues that were central to Trump’s campaign will directly affect their businesses. These include the continuation or cancellation of international trade agreements, different taxes and special tariffs to redefine the raw materials and sourcing markets.

One of the proposals that has originated the soundest concerns among apparel, fashion and luxury goods retailers is Trump’s suggested higher import tariffs on goods coming from countries such as China and Mexico.

Data analysed by FashionUnited Business Intelligence Unit indicate that these policies might prove to be a boon for the holiday season’s sales as consumers feel urged to go on shopping the aforementioned such goods before the new president takes his seat. On the other hand, the effects of implementing such policies could be very negative for the fashion and apparel industries and be felt sooner rather than later.

On the upside, US-based fashion companies, such as Ralph Lauren, Michael Kors and Tommy Hilfiger will start looking into alternative countries to source raw materials and move their production to, most likely ending in their own soil or going to the neighbouring Canada. This movement would potentially strengthen the domestic apparel industry, creating more jobs and revitalising the local industries. This trend would be more noticeable among smaller brands and fashion start-ups, which will likely intensify their manufacturing efforts.

Winners – From Ralph Lauren to Canada Goose

Meanwhile, smaller brands will arise as they capitalise on the ‘Made in USA’ label, as their products will become more attractive due to increasing prices at non-US based brands. FashionUnited Business Intelligence Unit understands that this might lead to a swift from fast fashion brands towards more mid-market and unique, US-based labels.

Ralph Lauren

Ralph Lauren stands out as one of the fashion labels that are to benefit from Trump’s presidency. As the preppy clothing brand has multiple production sites, it’d be easier for them to bring part of their business closer to home, including production.

Canada Goose

Despite Trump’s plans for other neighbouring countries such as Mexico, bilateral relations with Canada are thought to flourish under the new elected president. The Canadian maker of luxury winter down jackets started conversations with banks to help prepare for an initial public offering (IPO) back in October. Sources close to the matter said then that the company’s value is set around 2 billion dollars. The down used in Canada Goose coats is a by-product of the food industry, with most of it sourced from Hutterite farmers who raise free-range flocks in the Canadian prairies. Many of the other jacket components, such as the fabric, are globally sourced, reports the ‘Wall street Journal’.

Levi's

The iconic denim brand sources cotton – which comprises the 95 percent of its raw materials – from U.S., China, and India. After embracing the sustainable fashion crusade as its own, Levi’s Strauss Co. has made steady progress in cutting down its debt and winning over more customers including environmentally conscious Millennials.

Schott NYC and Tiffany’s are other companies that are likely to thrive in the upcoming months, according to market sources.

Losers – Michael Kors, Louis Vuitton, Prada…and Ivanka Trump

The Trump administration's tax reform plans could harm major U.S. retailers because tariffs on imports would affect nearly all of their merchandise, retail analyst Jan Rogers Kniffen told in a recent interview with the CNBC. "You worry about anybody who imports 100 percent of the goods. Guess what? Everybody imports 100 percent of the goods in retailing," the CEO of financial consulting firm J. Rogers Kniffen Worldwide Enterprises said on "Squawk Box."

“From our perspective, the 35 percent tariff is worrisome,” said Hun Quach, vice president of international trade at the Retail Industry Leaders Association. “Because our foremost priority is our consumers, our customers. We want to make sure we’re selling the goods that our customers want to buy at the price they want to pay.”

Data gathered by the American Apparel and Footwear Association (AAFA) show that despite the growth, 97 percent of all clothes and 98 percent of all shoes sold in the United States today are still imported. Even retailers that do not import a majority of their products are at risk, Kniffen said. "Now, do I really think that just because you only import 20 percent direct, you're better off? Not really, because if Ralph Lauren's importing and then selling it to you, or PVH is importing and selling it to you, they've got to adjust their pricing based on whatever happens with the cross-border tax as well," he said.

Michael Kors

On a related note, analyst Dana Telsey told the CNBC’s Squawk Box the border tax may hurt clothing companies most: "Our retailers, especially the apparel manufacturers, they produce a lot of their goods in Asia." Telsey continued: "You can't give consumers a 30 to a 35 percent price hike when we've had pricing on apparel come down, we have competition from the international fast fashion retailers … and their prices are competitive. We have to be competitive, too."

This is why Michael Kors might suffer from these and other changes announced by Donald Trump; it might be U.S.-based but all its products are made in China.

Zara and H&M

Similarly, international retailers' stocks are taking a hit in the market and the businesses are bracing for impact. Within this group, companies to watch as expected to take a big hit after Trump’s sworn as the next president of the United States, include fast fashion Zara and its parent group Inditex, and rival H&M.

Louis Vuitton, Prada and other luxury fashion giants

Neil Saunders, an analyst at Conlumino, said: “Trump’s policies could be quite far-reaching for retail, especially in terms of the labour market becoming more restricted and products becoming more expensive if import taxes are introduced. The latter is a major issue given how interconnected supply chains are.”

Research provider Euromonitor predicted that a Trump presidency could create an economic slowdown that would hurt retail sales of discretionary items. This slowdown is also expected to hit luxury goods retailers, as main players in this niche are based in Europe, hence being subject to these higher taxes.

Ivanka Trump

Funnily enough, one of the biggest losers would Trump´s policies regarding imports from China and other foreign countries - mainly in the Asia-Pacific region – actually materialised, is his own daughter´s namesake fashion brand, Ivanka Trump. As reported by the ´New York Times´, several products from Ivanka's line are produced overseas: in 2016 alone, there were at least 193 shipments of imported goods for Ivanka Trump brands, according to a review the paper commissioned from trade database ImportGenius. Furthermore, a review of tags and financial documents from G-III Apparel Group revealed that Ivanka's dresses and blouses are made in China, Indonesia, and Vietnam.

Photo: Donald Trump, by Gage Skidmore via Flickr

 

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