Tariffs Are Tripping Up Footwear Retailers — What Lenders Need to Know

Key implications

Costs and margins
Margins have faced pressure as fierce competition and consumer price sensitivity limited full cost pass-through, forcing firms to absorb part of tariff impacts — directly hitting profitability. While retailers and brands are aggressively diversifying their sourcing, the rapid and unpredictable policy shifts are adding new layers of complexity and uncertainty. Companies forecast some recovery in late 2025/2026 with mitigation efforts, however near-term profitability is down, and annual guidance is cautious.

Inventory
Tariffs have also added complexity to inventory management with increased instances of order cancellations, shipment delays, and timing receipts to avoid tariffs.  

Demand Softening
Consumer caution is reflecting in reduced open-to-buy commitments from retail partners. Value-priced brands and lower-end segments are under sharper pressure, especially in mass and off-price channels, while premium/lifestyle and trending national brands have shown resilience. Similarly, impact on demand has also been on fashion and lower-end categories. Athletic and kid segments have held up better due to continued brand launches and back-to-school demand.

Credit Metrics and Lending Implications  

Serviceability
Debt serviceability is expected to decline due to reduced operating profit from the pressure on volumes and margins. At the same time, working capital requirements are expected to increase as higher tariff costs inflate reported inventory values, and shipment delays add to the in-transit inventory.  

Funding requirements
Retailers with diversified supply chains, resilient consumer connect, brand and product mix are likely to navigate the headwinds better. In such situation, ONCI suite can help quick identification of borrowers with deteriorating metrics, the ones in need of funds or “bridge” working capital lines and near-term covenant waivers.