Dive Brief:
- Hydro Flask and Osprey parent company Helen of Troy is building inventory levels in advance of potential tariffs, CFO Brian Grass said in a Jan. 8 earnings call.
- The inventory buffer aims to help manage changes in its sourcing network, primarily focused on diversification from China, the CFO told analysts.
- According to Grass, the move “buys us more time before a potential impact so that we can make the supplier transitions and minimize the impact before the transition is made.”
Dive Insight:
Retailers and manufacturers have been evaluating sourcing strategies ahead of Donald Trump’s presidential inauguration next week. Under the new administration, the president-elect intends to expand or levy new tariffs on goods originating from China, Mexico and Canada, which would alter the trade landscape.
Trump’s proposal builds on the Biden administration’s move raise Section 301 tariffs on specific products from China, which went into effect Jan. 1.
Despite the many uncertainties surrounding the potential changes, including the type of products impacted, targeted countries and the magnitude of the tariffs, CEO Noel Geoffroy noted that “ diversification is a smart move for us.”
“What we try to do is ask ourselves the question of ‘does it make sense to make the change even without tariffs’ so that we're not in a position where we regret transitions or changes that we made, and tariffs don't come to be in these particular categories,” Grass told analysts.
Grass further noted that recent reports claim the tariffs may be focused on specific items which may exclude much of Helen of Troy’s categories, but other reports say the contrary. Regardless, “we just think the level of diversification that we're pursuing makes sense either way,” he said.
Helen of Troy has been re-tooling its sourcing network for some time, in addition to a larger Project Pegasus plan to offset rising costs. In 2023, the company began nearshoring some of its Hydro Flask and Oxo Pop production. At the time, Geoffroy, then the COO, said that the move “will help us diversify geopolitical risk, enhance our responsiveness and reduce inventory.”
However, in a July 2024 earnings call, Grass said that the initiative to pursue sourcing in North America hadn’t been as successful as its other diversification efforts. Helen of Troy further noted that it was working with suppliers to move production away from China to other countries in Asia.
