Executives at public industry firms discussed the impact of any higher duties on their businesses with Wall Street analysts last week as tariff talk continues to intensify. Firms are strategizing on how to combat looming 10 percent tariffs that will be levied on virtually all Chinese imports Sept. 1.
“We expect inventories to be up approximately 30 percent at the end of Q3 as we continue to pull forward core inventory in August ahead of potential tariff implementation,” Mike Stornant, SVP/CFO of Wolverine Worldwide said. The Merrell and Saucony parent confirmed that its “healthy inventory position” would help minimize the impact of any new tariffs. WWW intends to import 3.5 million pairs into the U.S. from China during the last four months of 2019. Next year, the company’s China imports will “decline dramatically” to 7.5 million pairs, less than 10 percent of the global pairs it sells, before dropping further to 3.5 million pairs in 2021. Wolverine estimates 75 percent of its production exiting China is due to existing sourcing partners relocating their factories elsewhere.
At Vista Outdoor, CEO Chris Metz says the CamelBak and Bushnell parent “had many orders from retailers” delayed or canceled in its Q1 as they “took a wait-and-see approach to how the tariffs would impact the products they carry.”
The List 4, as the remaining $300 billion worth of Chinese merchandise set for the 10 percent is often referred, could include Vista’s bicycle helmets brands Bell and Giro and also the components use to make CamelBak water bottles.
As it works with retail and sourcing partners to mitigate the potential impact of any additional tariffs on its products, Vista currently estimates its financial risk at $5-$10 million.
At Acushnet Holdings, any new List 4 tariffs would impact its FootJoy footwear and apparel business at an estimated cost of $2 million for the balance of 2019 and by $7-10 million in 2020 without the implementation of any mitigation actions. There would be little to no tariff impact on the company’s gear business since its golf balls are produced in New Bedford, MA and Thailand and its clubs are assembled in the U.S.
Meanwhile, at rival Callaway Golf, President and CEO Chip Brewer says the company’s operations team has “done an outstanding job over the last several years” diversifying ELY’s supply chain outside of China, meaning the company will not be significantly impacted by any new tariffs on List 4 products. The same goes for its recently acquired Jack Wolfskin business as the brand doesn’t source in China or currently sell much product in the U.S.
As for Adidas, where ongoing supply chain woes forced it air freight product into the U.S. in Q2, CFO Harm Ohlmeyer offered his assessment of China as a sourcing country. “There are a lot of brands moving out of China into other markets,” he said. “That’s what we’re seeing in the second half of 2019.”