US apparel giant VF Corp has moved to quell concerns the trade war between the US and China could be worrisome for its business.
The Timberland and North Face owner reported its annual results on Friday (19 October), posting a net income jump of 31% to US$507.1m and a 15% rise in revenue to US$3.9bn. The group also upped its full-year guidance, forecasting revenues of “at least” $13.7bn.
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On a call with investors in the wake of the results, the company said it is “closely monitoring” the China-US trade situation since 11% of its total cost of goods sold comes directly to the US from China.
China recently slapped tariffs on US$60bn of US goods in retaliation to President Trump’s move to impose new duties on US$200bn worth of Chinese goods.
Stephen Rendle, CEO and chairman of VF Corp, assured investors the company is in a favourable position despite the tariffs, thanks to the strengths in its global supply chain.
“By leveraging our global supply chain, we have positioned ourselves to address any additional changes in the overall trade environment with China. And we have the ability to reposition our global sourcing footprint in the near to midterm to mitigate the potential negative impact of additional tariffs should they materialise.”
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By GlobalDataWith more companies looking at sourcing from neighbouring countries over China, Rendle was asked whether the company was seeing any price increases and if Chinese vendors were making any concessions to keep business in the country.
“To date…we have not seen any price increases as our supply chain team looks to manage our global sourcing footprint,” he said. “It doesn’t mean to say that there couldn’t be. I think as we work so well with our group of vendors across each of our businesses, we’re able to really level set production by country based on where the most favourable tariff situation is for each of those inbound sets of goods. We have not seen [anything] in China that would give us any concern that we’re not going to be treated well or we’re going to be treated better. Again, I think this just comes through the strength of our relationships.”
Rendle added the company is continuing to “closely monitor the situation” and is “actively involved in scenario planning.”
“We’ve been working to reduce our exposure to China for many, many years. And where you see us now at 11% for our US imports, we can lever that down if need be or we can maintain it. It’s really paying very close attention to everything that each one of us reads in the news every day and the work that we’re doing in Washington with our partners there.”
Rendle also said the company is “pleased” with the recent trade agreement between the US, Mexico and Canada to replace NAFTA – now called the United States-Mexico-Canada Agreement (USMCA). For VF, which operates its own manufacturing facilities in Mexico, “we’ve retained the most significant benefits we’ve enjoyed through NAFTA, and the impact to our business is expected to be minimal.”
