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.
Industry Disruption Due to Global Trade and Tariffs
The company observed a surge in imports across key markets, contrary to expectations of import redirection due to tariffs.
Tariffs began to be collected in early May, but import surges persisted into the second quarter, driven by speculation and supply chain delays.
Management expects import levels to decline in the third quarter as the discourse around tariffs stabilizes, but potential new tariffs in Europe remain a concern.
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.
Impact of Tariff Delays and Preloading on Asian Imports
Asian appliance imports increased over 20% in the first half of 2025 due to delays in tariff implementation, creating significant short-term disruption.
Estimated 60 to 90 days of excess Asian inventory in the system as of May, with a gradual flow-through expected as tariffs take full effect.
Tariff delays have extended the preloading period, impacting promotional intensity and margins into Q3 and Q4.
Management believes the full impact of tariffs will benefit Whirlpool long-term, as the company is structurally positioned to capitalize on trade policy shifts.
Impact of Tariffs on Supply Chain and Special Order Business
Tariffs on China imports increased by 145% in April, causing temporary suspension of China-based special orders.
Tariff reduction from 145% to 30% in mid-May provided clarity and allowed realignment of production out of China.
Supply chain teams are working to fully resume special order capabilities in Q3, with ongoing negotiations and adjustments to tariffs potentially affecting future product sourcing and pricing.
Dafinchi
