Hey Friends,
Tariffs are the new cold war, and the war is on…..with Donal Trump’s new tariff policy being enacted over the weekend, Canada was the first to respond. Effective February 4, 2025, Canada is imposing 25% tariffs on $30 billion worth of U.S. imports in response to U.S. tariffs on Canadian and Mexican goods. These countermeasures will remain in place until the U.S. lifts its tariffs against Canada.
The tariffs apply only to goods originating from the U.S. under CUSMA regulations but will not affect U.S. goods already in transit on the enforcement date. Additional details are available on the Canada Border Services Agency website.
Prime Minister Justin Trudeau announced the measures as part of a broader $155 billion response to U.S. trade actions. The initial $30 billion in affected goods marks the first phase of Canada’s countermeasures.
Mexico also responded……Mexican President Claudia Sheinbaum has ordered retaliatory tariffs in response to the U.S. imposing 25% tariffs on all Mexican imports, escalating a trade war between the two nations. Sheinbaum emphasized that Mexico prefers dialogue but must defend its interests, instructing Economy Minister Marcelo Ebrard to implement “Plan B,” which includes tariff and non-tariff measures.
While details on targeted U.S. goods remain unspecified, sources indicate potential tariffs of 5% to 20% on pork, cheese, fresh produce, and steel, with the auto industry initially exempt. Ebrard called the U.S. tariffs a "flagrant violation" of the U.S.-Mexico-Canada Agreement.
According to Reuters, Mexico, the top destination for U.S. exports in 2023, received over $322 billion in goods, while the U.S. imported more than $475 billion worth of Mexican products. With nearly a third of Mexico’s GDP tied to U.S. exports, the economic stakes are high as the trade dispute unfolds.
Now for my favorite article of the week courtesy of our friends at Retail Touchpoints…..Since becoming CEO of Lululemon in 2018, Calvin McDonald has led massive growth, tripling the company's stock value and increasing revenue from $3 billion to $10.5 billion by 2024. Now, he aims to double revenue again to $12.5 billion by 2026 through product innovation, new categories, global expansion, and store growth.
Key Strategies for Growth:
Global Expansion: Lululemon is growing beyond the U.S., particularly in China, where store count has grown from fewer than 10 to 140 under McDonald’s leadership. The brand is also pushing into Europe and other global markets.
Store Growth: Lululemon remains committed to physical retail, with 700+ stores globally and more planned. McDonald regularly visits stores to engage with employees and customers.
Category Expansion: The company has successfully expanded into menswear, tennis, hiking, running, and footwear. Lululemon’s women's footwear line was designed specifically for female foot anatomy, filling an unmet need.
Refining Strategy: McDonald has shut down less successful ventures, such as childrenswear and self-care products, in favor of focusing on more lucrative opportunities.
Despite growing competition from Vuori and Alo Yoga, McDonald remains focused on taking market share from giants like Nike and Adidas, seeing Lululemon as uniquely positioned in the athleisure market.
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UPS plans to cut Amazon deliveries by more than 50% by late 2026, a move aimed at improving profitability but causing investor concerns. CEO Carol Tomé stated that while Amazon is UPS' largest customer, its business significantly dilutes margins. By reducing its reliance on Amazon, UPS can focus on more profitable deliveries, including those from emerging e-commerce players like Temu and Shein. The company also aims to cut $1 billion in costs this year. The announcement led to a 13.6% drop in UPS shares and also impacted FedEx stock. Analysts view the decision as a strategic shift toward long-term profitability, though it may weigh on near-term earnings.
Walgreens is suspending its quarterly dividend payments for the first time in 92 years as part of its long-term turnaround strategy. The decision aims to improve the company’s financial position by reducing debt and increasing cash flow, especially amid ongoing litigation and debt refinancing needs. Walgreens is facing a Department of Justice lawsuit over its handling of controlled substance prescriptions, a case similar to the one that led Rite Aid to file for bankruptcy in 2023. The company has also been cutting costs, including plans to close 1,200 stores over three years and laying off 250 support center employees. CEO Tim Wentworth emphasized that stabilizing the U.S. retail pharmacy business remains a top priority in the turnaround effort.
Walmart Canada is investing 6.5 billion Canadian dollars (about $4.5 billion USD) to expand its store and supply chain footprint, marking its largest investment since entering the country 30 years ago. The retailer plans to open dozens of stores, starting with five supercenters in Ontario and Alberta by 2027, including two set to open this year. A new distribution center in Vaughan, Ontario, will also open this spring. Additionally, Walmart Canada has sold its fleet business to Canada Cartage, though financial terms were not disclosed.
This announcement follows leadership changes, with Venessa Yates appointed as CEO and Steve Schrobilgen as chief operating officer. The investment builds on Walmart Canada’s previous 3.5 billion Canadian dollar initiative, which modernized stores, added new locations, and improved supply chain infrastructure. Walmart Canada also invested 200 million Canadian dollars last year in wage increases for frontline workers.
Ulta Beauty’s Chief Marketing Officer, Michelle Crossan-Matos, is leaving the company after two years, she announced in a LinkedIn post. She did not disclose her next move, and Ulta has not provided details on her departure timeline or succession plan.
Her exit follows other major leadership changes at Ulta, including CEO Dave Kimbell’s retirement, with COO Kecia Steelman stepping into the role on Jan. 6. Chief Merchandising Officer Monica Arnaudo is also set to leave this spring, with Ulta searching for her replacement.
During Crossan-Matos’ tenure, Ulta expanded its focus on wellness, introducing wellness spaces in stores and launching the Joy Council initiative. The company also revamped its loyalty program in late 2023, renaming it Ulta Beauty Rewards and enhancing perks. Loyalty remains a key driver for Ulta, with members increasing 5% year-over-year to 44.4 million in Q3, accounting for 95% of sales.
VF Corp. reported its first quarterly revenue growth in over two years, with Q3 fiscal 2025 revenue rising 2% to $2.8 billion, exceeding expectations. The growth was driven by stronger wholesale performance, which rose 8%, while direct-to-consumer (DTC) sales declined 3%. The North Face and Timberland posted revenue increases of 5% and 11%, respectively, while Vans—key to VF’s transformation strategy—continued to struggle, with a 9% decline. Dickies revenue also fell 10%.
The company’s Project Reinvent turnaround plan, launched in October 2023, includes restructuring Vans, selling Supreme, and strengthening brand-building efforts. CEO Bracken Darrell stated that VF is making progress but still needs to achieve sustainable top-line growth and stronger margins. Analysts believe the Vans recovery will take time but see potential for long-term improvement through product streamlining and marketing investments.
Regionally, VF saw low single-digit revenue growth, with the Americas and EMEA regions rising 1% and Asia Pacific growing 5%. Inventory levels were reduced by $300 million (14% year-over-year), reflecting improved efficiency. However, VF issued cautious guidance, expecting revenue to decline 4% to 6% in the coming quarter, indicating that challenges remain despite recent progress.
Speaking of revival…..Starbucks is reintroducing several policies in the U.S. and Canada to revive its traditional coffeehouse experience and counter declining sales and foot traffic. Changes include bringing back condiment bars, allowing baristas to handwrite customers’ names on cups, and expanding free refills for all paying customers on hot and iced coffee and tea.
The company is also ending its open-door policy, restricting seating and restroom use to paying customers, and enforcing rules against panhandling, discrimination, outside alcohol, and vaping. These updates, part of CEO Brian Niccol’s turnaround strategy, aim to balance efficiency with a more personalized in-store experience. Despite a 7% stock increase over the past year, Starbucks has faced three consecutive quarters of declining sales and customer visits.
Niccol also announced that 30% of the company’s food and beverage items will be eliminated by September as part of the “Back to Starbucks” plan. The move aims to simplify the menu, reduce customization, and improve efficiency for baristas while allowing for better innovation. Niccol, formerly CEO of Chipotle, emphasized that streamlining offerings will enhance customer experience and operational effectiveness. The changes were revealed during Starbucks’ first-quarter earnings call.
On the other side of the coin…..Levi’s is facing challenges in its core denim business, with weaker-than-expected sales of blue jeans in the U.S., prompting the company to focus on expanding its product assortment and direct-to-consumer business. CEO Michelle Gass emphasized the need to maintain and grow market share by marketing denim apparel beyond bottoms and expanding sales of tops. The company’s collaboration with Beyoncé has helped drive demand, especially in women’s apparel.
Levi’s nondenim brands showed mixed results in 2024, with Beyond Yoga growing 13% to $131.1 million in revenue, while Dockers declined 4% to $323.3 million. Levi’s is considering selling Dockers due to its underperformance. Meanwhile, the company continues to invest in its direct-to-consumer strategy, balancing these costs with cost-management efforts.
Potential macroeconomic risks—including tariffs, inflation, and currency fluctuations—could impact Levi’s performance, though the company is well-diversified in its sourcing, with less than 1% direct sourcing from China and 5% from Mexico. For fiscal 2025, Levi’s expects a revenue decline of 1% to 2%, but excluding external factors such as currency fluctuations and brand exits, it anticipates 3.5% to 4.5% growth. While Q4 2024 results showed momentum heading into 2025, uncertainty remains due to broader economic conditions.
Kohl’s is laying off around 200 corporate employees as part of its effort to improve profitability after a challenging year. This follows the company's decision to close 27 stores across 15 states by April. The layoffs, affecting around 10% of its corporate workforce, are part of a broader strategy to address missteps, including reduced inventory and a shrinking fine-jewelry business. Kohl’s reported an 8.8% drop in net sales to $3.5 billion in Q3 2024. While its headquarters in Menomonee Falls, Wisconsin, employs about 4,000 people, some of the eliminated positions were unfilled roles.
Shein has re-entered the Indian market through a long-term licensing deal with Reliance Retail, five years after being banned due to data security concerns. The app, which launched on Friday, is currently available in Delhi, Mumbai, and Bengaluru, with plans to expand nationwide. As part of the agreement, Shein must store all data within India. Before the ban, Shein was popular for its affordable fashion, and its return is expected to intensify competition in India’s fast fashion market. The move also aligns with Reliance Retail’s strategy of expanding its presence in global fashion retail.
Shein has faced significant scrutiny in the U.S. over concerns related to forced labor, data privacy, environmental impact, and its business practices. Shein’s rapid growth and dominance in the fast fashion industry have made it a target for increased scrutiny from U.S. lawmakers, regulators, and activists. The company has taken steps to address some concerns, such as pledging $70 million to improve labor conditions in its supply chain, but it continues to face challenges as it expands globally.
The European Union is planning to hold e-commerce platforms like Temu, Shein, and Amazon Marketplace liable for dangerous or illegal products sold online, according to the Financial Times.
Under the proposed customs reforms, online platforms would be required to provide data before goods arrive in the EU, allowing officials to better inspect packages. Currently, buyers are treated as importers, but the new rules would shift responsibility to the platforms.
Key changes include:
Platforms must collect duty and VAT and ensure goods comply with EU regulations.
Customs data will be centralized, and a new EU Customs Authority (EUCA) will be established to screen goods before they arrive.
Amazon, Shein, and the EU have not commented on the proposal, and Temu was unavailable for response.
And to wrap up…. as someone who spent the previous 8 years in Nashville this one hits a little close to home. Bargain Hunt has started liquidation sales at all 91 stores following the abrupt closure of its only distribution center in Antioch, Tennessee. A WARN Notice filed with the Tennessee Department of Labor confirms the company is permanently closing, impacting 294 workers at the distribution center.
The La Vergne, Tennessee-based discount retailer has been struggling, with employee terminations beginning January 22 and continuing through March 14. A Bloomberg Law report suggests Bargain Hunt may file for bankruptcy as soon as next week, with Riveron Consulting assisting in a possible wind-down of operations.
That’s all folks….Have a great week!