Abercrombie & Fitch is making this big change because of Trump's tariffs

Brian Sozzi

Abercrombie & Fitch (ANF) CEO Fran Horowitz isn’t waiting around for the Trump administration to strike a trade deal with China. To protect the company’s profits this holiday season and into 2020 from a host of fresh U.S. tariffs on China, Horowitz has taken aggressive action.

The apparel retailer’s CEO tells Yahoo Finance the company will only rely on China for about a “mid-teens” percentage of its merchandise by the end of 2020. Abercrombie sourced roughly 25% of its merchandise from China and imported into the U.S. at the end of 2018. That number is expected to drop to below 20% by the end of 2019.

Abercrombie’s supply chain expansion work is impressive relative to others across the retail landscape, which remain highly dependent on China for significant chunks of their inventory. Abercrombie now sources supply from 17 countries. It also makes products here in the United States.

“We are staying agile,” Horowitz says.

Looming new tariffs

To be sure, the entire apparel and footwear industry is sitting on pins and needles ahead of the holidays thanks to Team Trump.

On September 1, tariffs of about 15% will be placed on $300 billion in Chinese imports. Previously, the rate on this tranche was set at 10%. A tariff on the rest of the $300 billion that takes aim at consumer products like apparel, footwear and toys will arrive on December 15. It will be hit with a 15% tariff versus the 10% previously expected.

The American Apparel & Footwear Association estimates that 77% of U.S. imports of apparel, footwear and home textiles from China are on the list to be nailed with tariffs on September 1.

For its part, Abercrombie & Fitch estimates a $6 million hit to profits this fall because of the latest round of tariffs.

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