Chapter 02 Volume 20
On Running posted a record Q1 on May 12; up 26% with gross margin at 64.2%.
The US and China agreed to a 90-day tariff pause the same day, cutting duties from 145% to 30%.
LVMH announced the sale of Marc Jacobs to WHP Global and G-III Apparel Group for $850M on May 14.
A performance brand printing margin, a 90-day trade window, & a luxury house pruning its portfolio are three different signals, all worth tracking through Q3.
1. On Running Posts A Record Quarter. The Gross Margin Is The Real Headline.
On reported Q1 net sales of CHF 831.9M; up 26.4% constant FX. Gross margin jumped to 64.2% from 59.9%. Net income 82.2% to CHF 103.3M. APAC 61.4% constant FX, now 20% of the business. CEO Martin Hoffmann stepped down. Guidance held at 23% constant FX growth.
Takeaway: A 430-basis-point gross margin expansion is a pricing power story, not a tariff story. On runs a premium playbook with real discipline: no discounting, product that justifies the price in every market. Gross margin at 64% is built into channel strategy, product architecture, & retail execution.
2. US & China Agree To A 90-Day Tariff Pause. The Math Changes For Now.
On May 12, the US and China announced a 90-day mutual tariff reduction: US duties on Chinese goods drop from 145% to 30%, China's from 125% to 10%. Brands immediately released held production orders. Freight demand is spiking as inventory rebuilding begins.
Takeaway: Ninety days is a reprieve, not a resolution. Landed cost math improves meaningfully at 30% vs. 145%; real near-term margin recovery. But the sourcing decision you needed to make two weeks ago still needs to be made. Rebuilding China inventory without advancing diversification prices in a permanence that isn't there.
3. LVMH Sells Marc Jacobs. The WHP G-III Model Becomes Luxury's Exit Ramp.
On May 14, LVMH announced the sale of Marc Jacobs to a WHP Global and G-III Apparel Group joint venture for approximately $850M. G-III, investing ~$500M, will operate global DTC and wholesale. WHP handles licensing. The structure mirrors WHP's playbook on other repositioned brands and pushes WHP past $9.5B in global retail sales.
Takeaway: LVMH offloading Marc Jacobs signals portfolio discipline at the top of luxury, doubling down on mega-brands, exiting the middle. The WHP operator split is now the standard exit for designer brands that need volume management over prestige cultivation. For G-III, it's a real brand with real DTC, higher upside and higher execution risk than a pure license.
Please comment your POV on last week’s takeaways?
#OnRunning #Tariffs #USChina #MarcJacobs #LVMH #GIII #Sourcing #ApparelIndustry #FashionBusiness #ApparelAdvisors