Oil and Tariffs Threaten Footwear Firms – Here's Who Could Stay Ahead

The global footwear industry is facing a perfect storm as rising oil prices, geopolitical tensions, and looming tariff deadlines pressure margins and consumer demand. Companies must navigate higher transportation costs, supply chain disruptions, and inflationary headwinds to maintain profitability. While the sector's resilience is tested, firms with pricing power, strategic inventory management, or diversified supply chains could emerge as outperformers.

The Double Whammy of Oil and Tariffs

Crude oil prices surged to $74/barrel in June 2025 amid Israel-Iran tensions, hitting a six-month high. This directly impacts footwear firms, as fuel surcharges for shipping goods from Asia to U.S. ports are rising. Companies like Nike (NKE) and Caleres (CKX) are accelerating deliveries before July's global tariff deadlines (August 14 for China) to avoid additional costs. However, if Middle Eastern tensions escalate, oil prices could climb further, squeezing margins.

Meanwhile, U.S. tariffs on footwear imports – including a proposed 55% levy on Chinese goods and 46% on Vietnamese products – have already pushed landed costs higher. The Federal Reserve's data shows footwear prices rose 33% in the short term post-tariffs, with long-term increases settling at 18%.

Natural Gas Costs: A Hidden Expense

Natural gas prices, critical for manufacturing energy, are also on the rise. The Henry Hub spot price is projected to average $4.10/MMBtu in 2025, up from $3.44 in April. This affects footwear production, where natural gas fuels heating processes for materials like polyurethane.

Compounding the issue, U.S. LNG exports are expected to grow 22% in 2025, tightening global supply. Additionally, hurricane season risks in the Gulf Coast could disrupt production, further inflating prices. For manufacturers reliant on natural gas, these costs may force trade-offs between absorbing expenses or raising prices – risking consumer backlash.

Winners and Losers in the Footwear Race

Outperformers:
1. Nike (NKE): The athletic giant has already implemented $2–$3 wholesale price hikes, with retailers passing these to consumers. Its direct-to-consumer model and strong brand equity allow it to maintain margins better than competitors. Nike's inventory timing – shipping ahead of tariffs – also mitigates fuel cost risks.

1. Deckers Outdoor (DECK): Known for UGG boots, Deckers has a premium pricing strategy, enabling it to offset input costs. Its focus on e-commerce and localized production in low-tariff regions further shields it from disruptions.

2. Hibbett Sports (HIBB): A retailer with a strong focus on affordable footwear, Hibbett benefits from consumers prioritizing essentials. Its smaller inventory footprint allows agility in responding to price shifts.

At Risk:
- Steve Madden (SHOO): Reliant on Vietnamese imports, Steve Madden faces steep tariffs (46%) and rising fuel costs. Its lower price points leave little room for margin absorption.
- Caleres (CKX): A diversified retailer with brands like Famous Footwear, Caleres may struggle with consumer demand softness if gas prices force households to cut discretionary spending.

Investment Strategy: Focus on Pricing Power and Diversification

Investors should prioritize companies with:
- Brand strength: Premium brands like Nike and Deckers can pass costs to consumers without losing demand.
- Global supply chains: Firms like VF Corp (VFC) – owner of Vans and The North Face – have diversified production across Mexico and Indonesia to avoid overexposure to Chinese tariffs.
- Digital agility: Retailers leveraging e-commerce (e.g., DICK'S Sporting Goods (DKS)) can reduce overhead and navigate inventory challenges more efficiently.

Avoid companies with heavy exposure to high-tariff regions or low pricing power.

Bottom Line

Footwear firms are at a critical juncture. While rising oil and gas prices pose significant risks, strategic players with pricing power and supply chain flexibility could outperform. Investors should favor brands capable of weathering inflation and tariffs while avoiding those overly reliant on volatile inputs. Stay nimble, as geopolitical developments and consumer spending trends could shift outcomes swiftly.

Final advice: Allocate cautiously, with a focus on sector leaders. For a balanced portfolio, pair footwear stocks with energy hedges or inverse oil ETFs to mitigate exposure to crude price spikes.