“Plan In Motion”: Steve Madden Execs Reveal Major Shift From China Ahead of Trump’s Return

During multiple campaign rallies this past election cycle, President-elect Donald Trump suggested the possibility of a 10% or higher tariff on Chinese goods imported into the United States, which he argued would eliminate the country’s trade deficit. US companies with supply chains heavily exposed to China have taken note of Trump’s victory, and some are already implementing plans to shift manufacturing out of China.

On an earnings call on Thursday, Steven Madden executives made it very clear that they understand the changing trade landscape around China and what it means when Trump returns to the White House on Jan. 20. 

Execs at the fashion-forward footwear and accessories company noted that heavily exposed supply chains to China would be rerouted out of the world’s second-largest economy – in a move considered ‘friend-shoring.’ 

During the call, a Citigroup analyst asked Steven Madden executives: 

Thanks for taking our questions. Just first one, if you could just update us on your China sourcing exposure in… 

What your thought is around how you address that going-forward in light of the potential tariffs. And then secondly, can you talk a bit more about what played out in the wholesale footwear channel. I believe you were expecting an improvement in the core managed wholesale footwear business in 3Q versus 2Q. So I guess, how did that trend versus, I believe it was down mid-single digits in 2Q. So just any color there would be great. Thanks.

The executive responded: 

So first of all, with respect to your first question around China and potential tariff exposure. Look, we have — we have been planning for a potential scenario in which we would have to move goods out of China more quickly. We’ve — we’ve worked hard over a multi-year period to develop our factory base and our sourcing capability in alternative countries like Cambodia, Vietnam, Mexico, Brazil, et-cetera.

And, so as of yesterday morning, we are putting that plan into motion and you should expect to see the percentage of goods that we sourced from China to begin to come down more rapidly going-forward.

But just to give you some — you asked about the China exposure. Just to give you some context to hopefully help you frame the issue here. About two-thirds of our overall business is done in with US imports. So US imports account for about two-thirds of our overall business. And of that, we currently source a little bit more than 70% of those goods from China.

So in other words, just under half of our current business would be potentially subject to tariffs on Chinese imports. Our goal over the next year is to reduce that that percentage of goods that we source from China by — by approximately 40% to 45%, which means that if we’re able to achieve that and we think we have the plan to do it, that a year from today, we would be looking at just over a quarter of our business that would be subject to potential tariffs on Chinese goods.

Data compiled by Sayari shows that 64% of Steven Madden’s latest goods shipments came from Grenada and 34% from China. 

Trump’s not even in office and corporate America is beginning to enact plans to shift supply chains out of China, either friendshoring to allied countries or reshoring – all to avoid Trump tariffs. 

Hours after the Trump victory was declared on Wednesday morning, we provided Pro Subs with an excellent summary of the key consequences of the Trump victory, including tax cuts, fiscal spending, tariffs, immigration, regulation, and much more.