US apparel and footwear deals surge to record $21B as brands react to tariff pressure

U.S. President Donald Trump’s commerce warfare helps push U.S. clothes and footwear acquisitions to all-time highs this 12 months, with some firms merging to assist offset tariff prices whereas others go personal to climate the following 3-1/2 years of his presidency outdoors the general public market, dealmakers say.

Popular sneaker firm Skechers introduced a $9.42 billion deal in early May to go personal, days after it withdrew its annual earnings forecasts and despatched a letter — together with 75 different footwear firms — to Trump, stating that the tariffs have been an “existential threat” to the trade.

Sneaker vendor Foot Locker, which additionally signed the letter to Trump, in May accelerated its $2.4 billion sale to Dick’s Sporting Goods. While each deals have been within the works for months, bankers and analysts stated Trump’s tariffs are creating each chaos and alternative for retailers and brands to discover tie-ups. This has pushed dealmaking within the U.S. footwear and apparel sectors to roughly $21 billion in introduced deals year-to-date.

With greater than three months left within the 12 months, that determine is already a record, in accordance to LSEG information courting again to the Seventies — notably shocking for an trade the place valuations are usually not practically as lofty as these in tech or monetary providers. The earlier record for U.S. apparel and footwear M&A was final 12 months’s $16.1 billion, and earlier than that, 2021’s $15.6 billion, in accordance to LSEG.

“Scale is more important in a tariff-rich environment because you can negotiate better terms across a larger base with many of your counterparties,” stated Carmen Molinos, Morgan Stanley’s world co-head of client retail funding banking.

Morgan Stanley suggested Canadian apparel maker Gildan Activewear on its acquisition final month of U.S. underwear maker Hanesbrands for $2.2 billion.

Both firms produce extra in Central America and the Caribbean than in Asia, and primarily use U.S.-grown cotton, which gives them with some safety from tariffs. The mixture insulates them extra from fluctuating geopolitics, and Gildan was one firm trying to get greater amid the chaos.

“We think that we’re really well aligned to take advantage, actually, of this near-shoring opportunity,” Gildan’s CEO and co-founder Glenn Chamandy stated on an August investor name in regards to the deal.

Tariffs have been a shock to the system that confirmed retailers simply how rapidly their companies might get disrupted, highlighting the significance of scale, a number of bankers stated.

“In moments of turmoil and change, those who are in a position of strength are looking to build up on those strengths, and if they see the right strategic fit, they’re taking advantage (and buying),” stated JPMorgan’s Jonathan Dunlop, co-head of North America client and retail funding banking.

This 12 months, JPMorgan suggested 3G Capital on Skechers and model administration agency Authentic Brands Group’s $1.4 billion deal final month for Guess. Authentic additionally picked up Dockers from Levi Strauss, whereas one other model administration agency, Bluestar Alliance, introduced a deal to purchase Dickies from VF Corp this week.

Brand administration corporations sometimes purchase a model’s IP and then license it to working companions that deal with manufacturing, design, and gross sales.

“The brand management companies have been some of the most prolific acquirers of both middle-market and a handful of multi-billion-dollar retail brands,” stated David Shiffman, companion and head of client retail at Solomon Partners. The financial institution suggested the particular committee of Guess.

Navigating the uncertainty

Going personal, as in Skechers’ case, is turning into an more and more enticing choice to navigate the uncertainty with out the pressure of public quarterly reporting — particularly if firms really feel the general public market just isn’t valuing them appropriately.

Foot Locker, in the meantime, had been in discussions a couple of sale since Dick’s Executive Chairman Edward Stack first reached out to rival CEO Mary Dillon in January 2024.

Trump’s April 2 self-styled “Liberation Day,” when he introduced sweeping new world tariffs, helped seal the deal sooner than anticipated, in accordance to an SEC submitting. Foot Locker stated tariffs have been inflicting the corporate’s inventory to drop and that it was headed for a weaker-than-expected first-quarter earnings report — a improvement executives feared would additional depress shares.

The board selected May 10 to attempt to deliver “negotiations to a close quickly,” it stated in a securities submitting. The subsequent 4 days have been a flurry of paperwork and authorized conferences earlier than the businesses introduced their deal — with two weeks to spare earlier than reporting earnings.

Bankers advise waiting for extra tie-ups later this 12 months as stronger retailers search deals and struggling firms search for companions.

Private fairness agency Bain Capital is attempting to offload its stake in Canada Goose, and Lands’ End has acquired gives from model administration corporations.