Skechers Faces Crosswinds: Trade Tensions and Tariffs Undermine Forecast Visibility

Skechers USA Inc. (SKX) has withdrawn its 2025 financial guidance, citing "macroeconomic uncertainty stemming from global trade policies" as the primary driver. This decision, paired with a 6.5% after-hours share price drop following Q1 earnings that missed estimates, underscores the footwear giant’s vulnerability to escalating trade tensions and supply chain disruptions. The move signals a growing industry-wide reckoning with the costs of protectionism and geopolitical volatility, leaving investors to question whether Skechers can navigate these headwinds or face prolonged underperformance.

The Trade Policy Tightrope

Skechers sources over 80% of its footwear production from China and Vietnam, two nations at the center of U.S. trade conflicts. The U.S. levied a 145% tariff on Chinese goods, a punitive measure intended to incentivize domestic manufacturing but which has instead inflated costs for companies reliant on Asian production. CEO Robert Greenberg emphasized that these tariffs, combined with rising living expenses, are forcing consumers to prioritize value over brand loyalty—a shift that has driven Skechers to focus on slip-on shoes and other affordable styles.

However, the trade war’s ripple effects extend beyond tariffs. Supply chain bottlenecks, such as the Suez Canal blockage in 2021 and logistical delays in Vietnam, have further strained operations. Meanwhile, global minimum tax regulations are compounding tax burdens for multinational firms. These pressures have already taken a toll: Skechers reported an 11% sales decline in China during 2024, a market it once viewed as a "significant growth opportunity."

Market Reaction and Financial Pressures

The withdrawal of 2025 guidance sent SKX shares down sharply, compounding a 25% year-to-date decline and a 14% drop over the prior 12 months. This underperformance mirrors industry peers: Nike’s stock fell 22%, Deckers plummeted 45%, and Crocs dipped 9%, reflecting shared vulnerabilities to trade and demand uncertainties.

Skechers’ Q1 results highlight the challenges. While net sales rose 7.1% to $2.41 billion, this missed Wall Street’s $2.43 billion target. CFO John Vandemore attributed the shortfall to "current market challenges," including tariffs and supply chain delays. Analysts at UBS estimate that without mitigation, tariffs could boost Skechers’ cost of goods by 24%, squeezing margins on products already facing heightened competition.

Navigating the Storm: Opportunities and Risks

Despite the headwinds, Skechers retains strategic advantages. Its geographic diversification—expanding stores in the Philippines, Prague, and other markets—aims to reduce reliance on China. Additionally, the brand’s focus on value-driven products has historically insulated it from economic downturns. Q1 results showed strong demand for slip-ons and athletic styles, which accounted for 40% of sales, suggesting a viable path forward.

However, the company’s heavy reliance on Chinese manufacturing leaves it exposed to anti-American sentiment and sudden trade restrictions. The U.S.-China trade relationship, in particular, remains unpredictable, with retaliatory tariffs a constant threat.

Conclusion: A Cautionary Tale for Global Retailers

Skechers’ decision to withdraw its 2025 guidance is a stark acknowledgment of the risks inherent in today’s globalized economy. With tariffs adding ~$0.60 to every $2.50 pair of shoes and supply chains still fragile, the path to profitability remains fraught. While geographic expansion and product innovation offer hope, the company’s 2024 sales decline in China and the 24% cost pressure estimate from UBS suggest that near-term hurdles are significant.

Investors must weigh Skechers’ brand resilience and value proposition against the broader macroeconomic backdrop. If trade tensions ease and supply chains stabilize, SKX could rebound—its Q1 EPS of $1.17 met expectations, signaling underlying operational strength. Yet, with shares down 25% year-to-date and peers facing similar struggles, the sector’s recovery hinges on policy clarity, not just corporate agility. For now, Skechers exemplifies the fine line companies walk in a world where trade wars and tariffs have become the new normal.