Impact of Tariff Agreements on Sourcing and Pricing Strategy
The recent agreement to keep tariffs on European goods at 15% and eliminate tariffs on U.S. exports to Europe is a significant positive development for Interparfums.
This tariff agreement reduces the previously feared 30% to 50% tariffs, easing cost pressures and supply chain disruptions.
The company has already started moving towards alternative sourcing outside China to mitigate tariff impacts, especially for components like plastic caps and pumps.
Interparfums is implementing selective pricing increases, averaging around 2%, to offset higher tariffs, primarily in the U.S. where tariffs on finished goods are more impactful.
The company expects to absorb some short-term impacts from sourcing shifts and tariffs without major disruptions, thanks to proactive planning.
The improved trade environment provides greater clarity and supports the company's long-term sourcing and pricing strategies.
Foreign exchange losses and marketable securities losses contributed to a $6.7 million loss below operating income in H1 2025 compared to $1.5 million loss in H1 2024.
Gross margin expanded by 170 basis points to 66.2% in Q2 and 150 basis points to 65% for the first half, driven by favorable brand/channel mix and Dunhill discontinuation.
Interparfums reported net sales of $334 million in Q2 2025, a slight decline from Q2 2024 due to sales shifting from Q2 to Q1.
Net income for European operations increased 3% to $81 million, while U.S. operations net income decreased 26% to $18 million due to lower sell-in and Dunhill exit.
Operating income decreased 9% in Q2 to $59 million with a margin of 17.7%, but year-to-date operating income increased 1% to $134 million with a 20% margin.
Organic net sales grew 3% in the first half of 2025, with European-based operations up 7% and U.S.-based operations down 12% reported, or 6% organic decline excluding Dunhill.
Impact of Tariffs on Product Pricing and Supply Chain
Management highlighted the recent tariff policies impacting the company's costs, estimating an approximately $30 million impact in the second half of 2025.
The company is actively mitigating tariff effects through supply chain optimization, vendor sharing, and cost reduction initiatives, aiming to offset over 50% of tariff impacts.
Tariffs have led to increased costs in gear, footwear, and apparel, prompting selective pricing actions, while golf balls, manufactured mainly in the U.S., have been less affected.
Management emphasized the rapid change in tariff rates and the importance of supply chain flexibility to adapt to evolving trade policies.
Impact of Tariffs on Business Operations and Pricing Strategy
The company has implemented a multifaceted approach to managing tariffs, including diversifying suppliers, accelerating tariff cost reductions, leveraging scale for savings, driving internal cost efficiencies through automation, and implementing targeted price increases in Q3.
Tariff costs are currently impacting inventory costs immediately, but the effect on cost of goods sold (COGS) will be seen starting in Q4 due to inventory accounting methods.
Price increases to offset tariff costs are scheduled for Q3, with positive effects on net sales beginning then, but gross margins expected to decline in Q4 as tariff costs are recognized in COGS.
The company has a strong liquidity position ($656 million in total liquidity) and is managing debt levels to navigate tariff-related uncertainties.
YETI is executing a major transformation of its supply chain, with a focus on diversification to reduce reliance on China, aiming for less than 5% of COGS exposed to U.S. tariffs by year-end.
The company has made significant progress, with a multi-country sourcing strategy fully in place, supporting resilience and agility for 2026 and beyond.
Tariff costs, which impacted gross margins by approximately 220 basis points, are expected to decrease due to recent tariff rate reductions from 145% to 30% on Chinese goods, but uncertainty remains.
Supply chain transition has caused temporary inventory constraints and limited product launches, especially in Drinkware, affecting sales performance.
The company remains confident that supply chain efficiencies and cost management will help recover margins and support long-term growth.
Dafinchi