Retailers Go Private to Weather Trade War Storms: A Strategic Shift for Investors

The U.S.-China trade war has evolved into a labyrinth of tariff volatility, with effective rates on Chinese goods exceeding 30% in 2025. For retailers reliant on global supply chains, this environment has become a minefield of rising costs, disrupted logistics, and earnings unpredictability. In response, family-controlled firms like Skechers are leading a wave of take-private deals, shielding themselves from market pressures while positioning for long-term resilience. Investors should take note: this trend offers a roadmap for navigating trade uncertainty—prioritize firms with stable ownership and geographic diversification, and avoid those shackled to tariff-exposed supply chains.

The Take-Private Playbook: Skechers as a Blueprint

Skechers' $9.4 billion buyout—announced in early 2025—epitomizes the calculus behind this shift. By exiting public markets, the family-run footwear giant insulates itself from Wall Street's earnings pressure while gaining flexibility to restructure its supply chain. Skechers sources 40% of its products from China, a vulnerability compounded by the 50% tariff on natural graphite (critical for manufacturing) and the 25% rate on footwear under Section 301 lists. A private structure allows management to absorb costs, delay price hikes for consumers, and pivot production to lower-tariff regions like Vietnam or Mexico without shareholder scrutiny.

Why Operational Flexibility Matters Now

Tariff volatility isn't just a cost issue—it's a strategic one. Consider electronics retailers: the 7.5% Section 301 tariff on List 4A goods is dwarfed by the 20% fentanyl duty and potential 100% tariffs on semiconductors. Public companies face a Hobson's choice: absorb margin hits or raise prices and risk losing market share. Private firms, however, can:
1. Negotiate supplier terms quietly, bypassing public disclosures.
2. Rethink inventory strategies without quarterly earnings pressure.
3. Reallocate capital to diversify sourcing, even if it takes years to pay off.

The Next Targets: Under Armour and Columbia

Under Armour (UA) and Columbia Sportswear (COLB)—both family-influenced but still public—could follow Skechers' path. Under Armour sources 70% of its products from China, leaving it exposed to the 50% solar cell tariffs (critical for tech-infused apparel) and the 27.5% effective rate on textiles. Columbia, meanwhile, faces 30% tariffs on outdoor gear components, squeezing its 6.2% operating margin. Both have stable leadership and brand equity, making them ideal candidates for take-private bids.

Investor Imperatives: Diversification and Ownership Stability

To capitalize on this trend:
1. Favor firms with geographic diversification. L Brands (LB) and VF Corporation (VFC) have reduced China exposure to 25% and 35%, respectively, by expanding in Southeast Asia.
2. Prioritize family-controlled or private-equity-backed retailers. These entities have the autonomy to weather short-term pain for long-term gain.
3. Avoid pure-play China-exposed names. Companies like G-III Apparel (GIII), with 85% of production in China, face unsustainable margin pressures as tariffs on textiles and footwear remain volatile.

The Trade Truce Trap

While the May 2025 agreement temporarily lowers tariffs to 30%, the reprieve is fleeting—rates could revert to 34% within 90 days. This uncertainty underscores the need for structural solutions. Public retailers lacking a private exit plan risk becoming collateral damage in a tariff war with no end in sight.

Conclusion: Act Now Before the Storm Worsens

The take-private wave isn't just about avoiding earnings volatility—it's about surviving a trade landscape where tariffs are the new normal. Investors should act swiftly to reallocate capital toward firms with the agility to navigate this terrain. Skechers' move proves that in a world of 50% semiconductor tariffs and 100% EV duties, ownership structure and geographic flexibility are the ultimate competitive advantages. Those who ignore this shift risk being washed away by the trade war's tides.