KMD Brands Redirects US Inventory Amid Tariff Uncertainty
KMD Brands, the parent company of Kathmandu and Rip Curl, is reallocating some of its inventory from the United States to other international markets due to uncertainties surrounding tariffs imposed by US President Donald Trump. In a recent market announcement, KMD Brands indicated that both Rip Curl and Oboz Footwear have substantial operations in the US, with Rip Curl contributing around 12 percent and Oboz around 7 percent to the group’s total annual sales.
Impact of Global Tariff Increases
The United States has recently implemented global tariff hikes on products produced outside its borders, which includes significant increases on goods imported from Asian nations. KMD Brands noted that both Oboz and Rip Curl’s products are primarily manufactured in Asia. The company’s latest modern slavery statement for 2024 highlights that China is its largest sourcing country, accounting for 35 percent of spending on branded items, with a total of 79 factories. Following China, Vietnam ranks second at 31 percent, operating 22 factories, while Indonesia accounts for 13 percent with six factories.
Specific Tariff Rates on Asian Imports
Among the tariffs announced last week, a 46 percent flat rate has been applied to goods from Vietnam, a 37 percent rate on imports from Bangladesh, and a 27 percent increase for products coming from India. Additionally, Trump has introduced a 34 percent tariff on nearly all imports from China, compounding a previously established 20 percent tariff, resulting in a total duty of at least 54 percent.
Concerns Over Consumer Demand and Pricing Strategies
KMD Brands expressed concern that these tariff increases present considerable uncertainty for apparel and footwear companies that operate in the US market, potentially leading to price hikes that could affect consumer demand. The company is actively monitoring market conditions, evaluating the best timing for any price adjustments in response to increased input costs, and exploring cost-saving strategies to maintain profitability.
Inventory Management and Future Projections
In light of the current consumer uncertainty and the evolving nature of tariff discussions, KMD Brands plans to shift some US inventory to other major global markets or retain it with existing international third-party logistics partners. Both Rip Curl and Oboz have substantial seasonal inventory in the US that arrived before the latest tariff increases. Given the unpredictable consumer landscape, the company finds it premature to provide an accurate assessment of the financial repercussions for the remainder of FY25.
Strategic Evaluation for Long-term Value
Brent Scrimshaw, Group CEO and Managing Director, remarked that the new US tariffs add another obstacle in an already difficult consumer market. He indicated that the company is considering various strategic avenues, including pricing adjustments, cost management, and inventory investments, to protect the long-term value of their brands and their stakeholders.
Cettire’s Response to Tariff Implications
KMD Brands is not the only ASX-listed company responding to the US tariffs. Recently, luxury online retailer Cettire informed investors that these tariffs are expected to impact most luxury retailers, both online and brick-and-mortar, since a significant number of luxury products are made in the EU. Cettire is currently evaluating the full ramifications of these tariff adjustments on its global operations. Several prominent luxury brands have already indicated intentions to raise prices on luxury goods sold in the US to offset potential tariff impacts.
Future Strategies and Sales Insights
Cettire has begun formulating strategies to adapt to and mitigate possible changes in the US tariff landscape throughout 2024 and into the first quarter of 2025. The company’s localization strategy has been key in expanding its geographic revenue base, a trend that Cettire anticipates will continue. In its statement, Cettire reported that 41 percent of its total gross sales in the first half of FY25 were derived from goods manufactured in the EU and sold to US customers. Furthermore, no immediate alterations have been made to the US de minimis exemption concerning EU-manufactured goods, meaning shipments valued under $800 will remain duty-free and unaffected by the tariff changes. Cettire also highlighted that its average order value in the first half of FY25 was A$821 (approximately US$514).
