What’s Happening: President Donald Trump finally provided some clarity on tariffs last week, with new, higher rates due to kick in for much of the world on Aug. 7.
Good News: The fashion industry got off relatively easy. A 20 percent tariff on imports from Bangladesh would have been unthinkable a year ago, but feels mild compared to the 37 percent threatened in April, albeit steeper than the 10 percent tariff already in place. Luxury brands won’t like the 15 percent tariff on EU goods, as their US customers are already fuming about high prices. But again, could have been worse.
Bad News: What did Switzerland do to deserve a 39 percent tariff, one of the world’s highest? Swiss watchmakers are surely asking themselves that question right now. India’s aspirations as a garment sourcing alternative to China and Southeast Asia have also taken a major hit. Trump has imposed a 25 percent tariff and threatened to go much higher if the country doesn’t stop buying Russian oil. Brazil’s robust footwear sector is now staring down a 50 percent tariff.
Wait and See: As with all things Trump, don’t assume the tariffs he announced will be what goes into effect on Thursday, or that they won’t change after. The S&P 500 fell more than 1 percent on Aug. 1, and Trump may be driven back to the negotiating table if stocks continue to slide.
Can Beauty Bounce Back?
What’s Happening: A grab-bag of beauty earnings are coming this week, including Japanese conglomerate Shiseido, Hailey Bieber’s label Rhode’s new holding company E.l.f. Beauty, plus Nivea and La Prairie owner Beiersdorf (all Wednesday). The prestige haircare brand Olaplex follows a day later.
The Hunt for Growth: These companies play in different corners of the market, but what they have in common is they’re all searching for new growth levers now that the strategies that brought them success earlier in the decade have petered out.
Shiseido is struggling with weaker spending at home in Japan and China, but its biggest challenge is reconnecting with American consumers. Sales at Drunk Elephant, which it acquired in 2019 for $845 million, have nosedived after a brief Gen-Z (and Gen Alpha) bump that alienated what had been a mostly Millennial customer base. There are questions about the path forward for Dr. Dennis Gross and Nars, too.
At E.l.f. Beauty, growth is slowing, with sales inching up just 4 percent in its fiscal fourth quarter compared with a year earlier (by comparison, in 4Q24, sales shot up 71 percent). Of course, E.l.f. just acquired Rhode for $1 billion, giving it an exciting, higher-margin lane to play in. Investors agree: after plunging earlier in the year, the company’s stock has mostly recovered since the deal was announced in late May.
Olaplex has the toughest assignment. The once-hot haircare line is trying to avoid a third year of declining sales. It’s reconnecting with stylists and consumers who championed the brand early on but moved on long ago, while also building out third-party distribution. Low expectations and easy comparisons to year-ago sales should provide a bit of space to work on a turnaround, but the success rate for 2010s it brands’ second acts is low.
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