Brands Like Lululemon Are Feeling ‘De Minimis’ Pain—But Some Companies Are Cheering

Online merchants aren’t the only ones reeling from the end of the de minimis tax exemption.

Retailers with physical footprints, such as Lululemon, Coach and Kate Spade, will pay millions now that import taxes apply to packages of minimal value, executives have said in recent weeks.

Athleticware giant Lululemon (LULU) downgraded its outlook for the year on Thursday based largely on the loss of de minimis, a nearly 90-year-old provision that—until last week—waived tariffs on parcels worth less than $800.

“We are facing yet another shift today within the industry related to tariffs and the cost of doing business,” CEO Calvin McDonald said on a conference call Thursday, according to a transcript.

The athletic apparel company uses facilities in Canada to fulfill about two-thirds of online orders from U.S. customers. Most of these will now be subject to import taxes, Lululemon said, contributing to an estimated $240 million tariff bill this year and a $320 million hit next year. 

‘The Tariffs Are Real’

The end of de minimis is a “meaningful factor” in the roughly $160 million tariff impact Coach and Kate Spade parent company Tapestry (TPR) expects this year, CFO Scott Roe said on a conference call last month. 

“The tariffs are real,” Roe said, according to a transcript made available by AlphaSense “We’re going to fight our way through it.”

Both companies are looking to mitigate the impact by altering their supply chain, reducing company expenses and increasing prices.

Social media lit up with commentary from Etsy and Ebay shop owners when de minimis ended last week. Chinese discounters Shein and Temu are also expected to be impacted. Package carriers from some nations temporarily stopped using the US Postal Service to give themselves time to adjust to the change.

Several domestic companies are cheering the death of de minimis. If Americans have to pay more for or undergo some speedbumps in order to get goods from overseas, they may consider domestic alternatives.

The move “can only help” Urban Outfitters (URBN), CEO Richard Hayne said last month. Five Below (FIVE) shared a similar assessment of the new policy.

David Simon, CEO of shopping mall operator Simon Property Group (SPG), said he wished a loophole that some Chinese companies took “real advantage of” was closed before Forever 21 was on the path to bankruptcy.

The new policy is “really, really, really important” to American companies, Simon said this spring.