Tariff Quote Watch: VF Corp’s North Face Tariff Chill Set To Pass

Apparel manufacturer and brand owner VF Corp is in the middle of a strategic reorientation that has seen the firm exit from jeans and outlet stores as well as considering divesting of workwear to focus on brands including North Face and Timberland among others. It’s also been beset by the U.S.-China trade war.

The firm’s CFO, Scott Roe has stated that “while tariffs not a big impact overall or even for the year, we do see, for the first time, a negative tariff impact in the fourth quarter“. Meanwhile CEO Steven Rendle stated “the recent Phase 1 trade deal between China and the U.S. should yield a more constructive consumer and retail environment“.

The apparel industry has been subject to list 4A tariffs on imports from China at a 15% rate since September. As outlined in Panjiva’s research of Jan. 16 that rate will be cut to 7.5% from February, mitigating the impact on the apparel sector. It’s also worth noting that the implementation of tariffs also came during the off-peak import season after winter clothing had already been shipped.

Panjiva analysis shows that U.S. imports of apparel and apparel worth $30.5 billion in the 12 months have been subject to duties, equivalent to 77.3% of the total. Those imports fell by 25.2% year over year in the three months to Nov. 30 versus a 12.1% slide for non-list 4A products. The widespread decline may reflect earlier stockpiling ahead of the tariffs’ application.

EVIDENCE OF APPAREL STOCKPILING DURING LIST 4 TARIFF ARRIVAL

Chart segments U.S. imports of apparel from China by section 301 tariff line coverage. Source: Panjiva

Focusing on shipments associated with North Face and Timberland, Panjiva’s seaborne import data shows some evidence of stockpiling after a 16.7% year over year increase in 3Q reversed to a 9.2% decline in 4Q. The decline in shipments from China was faster at a 16.1% slide in 4Q. That means China represents just 11.7% of imports in 2019 compared to 17.6% in 2016.

Instead the VF Corp may have scaled up imports from Vietnam to 22.1% from 18.3% to compensate. That does, however, leave the firm exposed to the risk of future tariff policy widening. One feature of the brands; supply chain though is a high degree of diversification including 12.5% of imports from Bangladesh and 11.7% from the Dominican Republic

VF CORP STOCKPILES CHINA SUPPLIES, SUFFERS WIDER SLOWDOWN