In President Donald Trump’s second term, a new normal for fashion has arrived — that of incessant uncertainty.
This week, talks of a possible recession are back on the table as Trump implemented sweeping tariffs on items such as steel and aluminium and threatened more to come, sending Wall Street into a selling frenzy and stocks across industries plunging. When asked about whether he expected an economic slowdown in an interview Sunday, the president himself refused to rule out the prospect of a recession.
On Thursday, J.P. Morgan’s chief economist Bruce Kasman told reporters that the likelihood of a US recession now stands at 40 percent, up from the 30 percent forecast he made at the start of the year. Canada also faces an imminent risk of recession as the trade war between the two countries — each other’s largest trade partner — continues to escalate. Gross domestic product in Mexico, meanwhile, already contracted in the fourth quarter of 2024 in part due to a severe drought last year. US tariffs are expected to further dampen economic activity, pushing Mexico to be on track this year to enter a technical recession, defined as two consecutive quarters of negative growth in terms of GDP.
If a recession occurs, any and every sector would feel a hit, but fashion is particularly vulnerable. Increased tariffs raise import costs for American companies that manufacture goods overseas, which some retailers have said they will absorb as a hit on profit margin rather than pass onto the consumer. For example, Victoria’s Secret said last week it’s expecting operating income to fall short by $10 million to $20 million this year because of Trump’s additional 10 percent tariff on Chinese-made goods.
For retailers, incorporating higher costs of production requires taking a conservative approach to capital expenditures and potentially hitting the brakes on growth initiatives, such as major personnel hires or expensive marketing campaigns.
At the same time, the low consumer confidence that comes with a potential recession will likely have an effect on discretionary spending. A pullback in North America’s consumer economy won’t only impact American retailers; the fallout would reach any international business with significant exposure to the US market, from luxury labels that sunk millions into new flagships in the American South in recent years to fast-fashion enterprises like Mango and Uniqlo targeting US consumers as their biggest growth avenue. There is also the tremendous risk of financial contagion to Europe, Asia and beyond if volatility in the markets spreads.
A recession is hardly written in stone. In the US, hourly wages are still growing while overall employment has held steady and inflation continued to cool in February — indicators that the economy is stable for now.
Another silver lining is that fashion companies are simply more agile and equipped to deal with unpredictabilities in the economy than before. The pandemic caused many casualties in the sector, but the survivors have learned to be stronger than ever, nimbly responding to the twists and turns in the economy ever since the shutdown that occurred exactly five years ago.
The slowdown in China, too, has taught retailers to avoid dependence on any one particular geography. Diversification in every area of operation is key.
“At the end of the day, tariffs are a cost variable,” BMO Capital Markets analyst Simeon Siegel told The Business of Fashion earlier this week. “People have been feeling negative since the Covid overhang. But they’ve also been spending. That is the important point.”
THE NEWS IN BRIEF
FASHION, BUSINESS AND THE ECONOMY
Gucci appoints Demna as artistic director. Georgia-born Demna has been creative director of Kering’s Balenciaga brand since 2015. There, his penchant for oversized, Goth-inflected sportswear collided with the house’s couture codes to spark a renaissance for the Parisian house. Kering shares plunged 12 percent following the announcement.
Donatella Versace steps down as chief creative officer of Versace. Versace will become chief brand ambassador after nearly three decades at the creative helm. She will be succeeded by Dario Vitale.
Brunello Cucinelli sees operating profit increase 13 percent in 2024. Earnings before interest and taxes came in at €212 million ($230.40 million), slightly below an analysts’ forecast of €214 million, according to LSEG data.
Hugo Boss sees broadly stable 2025 sales. It sees annual sales development between a 2 percent decline and a 2 percent increase, to a range of €4.2 billion to €4.4 billion ($4.57 billion to $4.79 billion). The company expects full-year earnings before interest and taxes to rise between 5 percent and 22 percent.
Golden Goose reports double-digit sales growth in 2024. Sales grew 13 percent to hit €654.6 million ($714 million) last year. The private equity-backed luxury sneaker maker is focusing on maintaining momentum after abruptly shelving plans for an IPO last year.
Inditex meets fourth-quarter sales forecast. Inditex sales were up just 4 percent in currency-neutral terms over the Feb. 1 to March 10 period, compared to 11 percent growth a year ago. Strong sales from Zara have led to a doubling of Inditex’s share price over the past three years.
Mango’s sales rise 8 percent in 2024. The Spanish fashion retailer reported sales of 3.33 billion euros ($3.62 billion) in 2024. The company attributed this growth to its international expansion, particularly in the United States, mirroring the strategy of its competitor Zara.
Shein stays committed to IPO. Former Bear Stearns banker Donald Tan said a listing would help earn public trust and increase transparency of Shein, which has been accused of tolerating labour violations among its Chinese suppliers.
Hudson’s Bay prepares to file for bankruptcy. The Canadian department chain has been unable to secure financing to shore up its cash reserves. Hudson’s Bay, which sold a string of real estate assets to help pay down debt in November 2023, has been cutting costs.
Puma warns of tariffs and geopolitical tensions in forecast. The German sportswear brand expects currency-adjusted sales to grow in the low- to mid-single-digit range. Revenue is expected to grow about 8 percent this year.
Walmart faces heat from Beijing after demand for price cuts. Several Chinese authorities, including the Ministry of Commerce, have met with the US retailer to learn about its negotiations over price cuts with suppliers in China. A post by Yuyuantantian, a Weibo account affiliated with state-run China Central Television, hinted that Walmart could expect more actions from Beijing if it continues to do so.
Forever 21 weighs liquidation ahead of bankruptcy in coming days. Efforts to find a buyer for the fast-fashion retailer to avoid a liquidation have so far failed, said the people, who asked not to be identified discussing private information. Talks with one potential bidder are ongoing, they said.
FTC seeks delay in Amazon Prime case over resource shortages. The Trump administration’s push to reduce federal budgets has led to severe resource constraints, including staff shortages and spending caps. The FTC is asking US District Court Judge John Chun to delay the current Sept. 22 trial date.
UK splits with EU by opting against snap tariff retaliation. Business and Trade Secretary Jonathan Reynolds called the US decision to impose 25 percent levies on foreign metal products without exemptions “disappointing.” Nevertheless, junior Treasury minister James Murray told Times Radio the UK wouldn’t retaliate immediately.
Inditex’s transport emissions balloon to record highs. Despite ambitious climate goals, Inditex’s transport-related carbon emissions grew twice as fast as product volumes in 2024. According to its operator Aena, cargo shipments nearly doubled that year.
THE BUSINESS OF BEAUTY
L’Oréal recalls acne treatment on cancer-linked chemical. L’Oréal’s Effaclar Duo, sold under the French company’s La Roche-Posay brand, is made with benzoyl peroxide, which kills bacteria to help treat acne. The company said testing found trace levels of the benzene contaminant in one lot of the product.
Estée Lauder Companies partners with India’s Ministry of Commerce to advance beauty innovation. The partners will expand ELC’s Beauty&You initiative, an entrepreneurial programme designed to discover and nurture the country’s next generation of beauty brands. It also announced that it will be creating an offshoot that specifically targets female founders.
PEOPLE
LVMH seeks to clear way for Bernard Arnault to stay at the helm until 85. The company’s shareholders will vote on April 17 to extend Bernard Arnault’s tenure as CEO, following a proposal to raise the company’s maximum age limit for leadership positions. The maximum age was already increased from 75 in 2022.
Sephora overhauls Asia leadership after China setback. Sephora chief executive officer Guillaume Motte has taken personal charge of its operations in China. Jenny Cheah, regional managing director for other Asian markets including Southeast Asia, India and Oceania, remains in her role.
OTB taps Simone Belloti as Jil Sander’s creative director. Industry interest in Bellotti surged following a series of stand-out shows for Bally. The designer is replacing Lucie and Luke Meier, who parted ways with Jil Sander in February.
MEDIA AND TECHNOLOGY
Trump says four bidders in play for TikTok deal “soon.” “We’re dealing with four different groups, and a lot of people want it,” Trump told reporters aboard Air Force One on Sunday. ByteDance Ltd.’s TikTok faces a deadline of April 5 to strike a deal for its US operations.
Compiled by Yola Mzizi.
