The Glossy Podcast: Breaking Down the Tariff Playbook
Release Date: May 23, 2025
Host: Danny Parisi & Zofia Zviglinska

Introduction

In this episode of The Glossy Podcast, hosts Danny Parisi, a senior fashion reporter, and Zofia Zviglinska, an international reporter, delve deep into the current landscape of the luxury fashion industry. The discussion centers around recent earnings reports from major players like Richemont, Chanel, and Mytheresa, followed by an insightful conversation on strategic responses to the fluctuating tariff situation between the US and China.

Earnings Review

Richemont's Robust Performance

The episode kicks off with an analysis of Richemont's latest earnings. Richemont, renowned for owning prestigious brands like Cartier and various luxury jewelry maisons, reported impressive revenues for the fourth quarter amounting to €21.4 billion, marking an 8% increase. Notably, their jewelry segment saw double-digit growth across all regions except Asia.

Danny Parisi highlights, "Their jewelry maisons were up like double digits," pointing out the stability in this typically volatile sector despite challenging economic conditions.

Zofia Zviglinska adds, "Richemont’s consistent and stable supply chain must be a significant factor in their strong performance," emphasizing the resilience of their jewelry offerings amid supply chain disruptions.

However, Richemont's watch segment faced challenges, with sales declining by 13%, particularly impacted by the Asian market's slowdown. This softening demand in China reflects broader economic sentiments rather than mere economic downturns, suggesting a shift in consumer psychology post-pandemic.

Mytheresa's Strategic Moves

Transitioning to Mytheresa, the conversation highlights the company's strategic acquisition of Netaporter and its integration into the Lux Experience umbrella. CEO Michael Klieger aims to differentiate the portfolio by targeting diverse consumer segments without causing internal competition among brands.

Danny Parisi observes, "Mytheresa's net sales growth in the last quarter was 4%, with GMV per top customer up by 18%," underscoring the brand's robust performance despite an overall luxury market slump.

Zofia Zviglinska notes the leadership appointments, "Heather Cameron is coming in as the NET a Porter CEO... Mirko Nobili is the new youth CEO," indicating a strategic emphasis on specialized leadership to foster unique brand communities within the conglomerate.

The collaboration with luxury giants like Prada and Balenciaga further cements Mytheresa’s position, although there are concerns about maintaining brand differentiation and managing the expanded portfolio effectively.

Chanel's Profit Decline

Chanel's recent earnings revealed a notable 30% drop in profits for 2024, the first significant decline since the pandemic. Revenue dipped by 4.3% to $18.7 billion, primarily attributed to reduced luxury spending in China.

Zofia Zviglinska speculates, "Price increases at Chanel, which have been contentious in the industry, might be contributing to the softness in sales," suggesting that elevated prices could be deterring consumers amidst economic uncertainty.

Danny Parisi discusses Chanel’s strategic move towards vertical integration, "Chanel is investing close to $600 million in vertically integrating their supply chain," aiming to gain more control and stabilize operations amid volatile manufacturing environments.

Additionally, Chanel has implemented a hiring freeze after rapid expansion, hiring 10,000 employees over the last three years, signaling a pivot to cost management in response to declining sales.

Sponsor Segment: Listrack

Before delving into the tariff discussion, the podcast includes a segment sponsored by Listrack, a digital marketing platform specializing in beauty and fashion. Jamie Elden, Chief Revenue Officer at Listrack, discusses the importance of leveraging rich communication services (RCS) to enhance personalized consumer connections.

Jamie Elden states, "RCS messaging through mobile phones allows a brand to pull in their TikTok shop content, their reels, their influencer content all into a video environment on somebody's cell phone."

Listrack emphasizes the transformative potential of RCS in creating interactive and immersive marketing experiences, positioning it as a crucial tool for brands aiming to deepen consumer engagement in 2025.

Breaking Down the Tariff Playbook

After the sponsor break, Danny and Zofia engage in a comprehensive discussion on navigating the uncertain tariff landscape between the US and China. As of the recording date, reciprocal tariffs have been suspended, reducing rates from 125% to 10% with a 90-day pause until August 10th.

Strategies to Mitigate Tariff Impacts

1. Raising Prices:

   • Danny Parisi explains, "When costs go up, your prices have to go up," highlighting the inevitability of price adjustments.
   • Brands like Base have adopted transparent communication strategies, openly discussing the impact of tariffs on their pricing. One example included a brand acknowledging tariffs as a "complete dumpster fire," fostering consumer empathy through honesty.

2. Transparency and Communication:

   • Zofia Zviglinska notes the rise of using social media, particularly reels, for direct brand-consumer communication. Brands are increasingly utilizing video content to explain tariff-induced price changes transparently.
   • Danny Parisi emphasizes the importance of aligning consumer sentiment with reality, stating, "It's taken some time for consumer sentiment to match with reality," indicating a need for clear and honest communication.

3. Tariff Engineering:

   • Zofia Zviglinska introduces the concept of tariff engineering, where brands modify products to qualify for lower import duties. For instance, Converse adds felt soles to their sneakers to classify them as slippers, reducing tariffs from 48% to 3%.
   • Danny Parisi remarks on the creativity of such strategies, "Tariff engineering is altering the product and the supply chain in ways to maneuver around some of the nuances of tariff law."

4. Diversifying Manufacturing Locations:

   • Brands are increasingly exploring manufacturing outside of China to mitigate tariff risks. Countries like Vietnam, Sri Lanka, and Mexico are becoming alternative hubs.
   • Zofia Zviglinska adds, "Diversifying your manufacturing is a smart and sustainable thing and probably good for the business," despite the complexities involved in setting up new manufacturing operations.

5. Bonded Storage:

   • Danny Parisi explains bonded storage as a method where products are stored in specialized warehouses without paying duties until they are shipped out, allowing brands to take advantage of lower tariff rates when available.
   • This strategy involves higher storage costs but can lead to significant savings if tariffs decrease during the storage period.

6. Licensing Models and Supply Chain Partnerships:

   • Brands like Von Dutch utilize licensing to allow local partners to produce and sell products, reducing direct tariff exposure.
   • Zofia Zviglinska also mentions collaborations and local licensing as ways to distribute tariff burdens across different regions.

7. Shifting Market Focus:

   • Some brands are pausing or reducing their focus on the US market, redirecting efforts towards more stable regions like the UAE.
   • Zofia Zviglinska observes, "Brands have had to pull out some of that [US focus]," opting for markets with less economic volatility.

Conclusion

The episode concludes with an assessment of the viability and sustainability of the discussed strategies. Diversifying manufacturing locations and implementing tariff engineering are viewed as long-term solutions that can provide stability amidst economic uncertainties. In contrast, raising prices and relying on transparency are immediate measures that require careful balancing to maintain consumer trust and loyalty.

Zofia Zviglinska summarizes, "Whether that's bonded storage setups, new factories, those are all longer-term plays," while Danny Parisi adds, "The stated purpose of the tariffs was to get people to manufacture in the US... it's extremely difficult and there's not the infrastructure."

The hosts emphasize the importance of adaptability and strategic planning for brands to navigate the evolving tariff landscape effectively.

Key Quotes

• Danny Parisi [05:50]: "It feels like a good category to be in" referring to the resilience of the jewelry segment.

• Zofia Zviglinska [08:34]: "The biggest challenge now is for the company to realize how to target those customers without cannibalizing across the brands."

• Jamie Elden [23:29]: "What we're doing is we're becoming a shopping partner with that customer."

• Zofia Zviglinska [31:37]: "Brands are having deeper conversations with consumers through the reels format."

• Danny Parisi [36:47]: "Tariff engineering is altering the product and the supply chain in ways to maneuver around some of the nuances of tariff law."

This episode of The Glossy Podcast provides a comprehensive overview of the current challenges and strategic responses within the luxury fashion industry, offering valuable insights for brands navigating the complexities of global tariffs and shifting market dynamics.