Global fashion falters in Q1 FY25 amid tariff pressures

With only three ‘Strong’ and two ‘Moderate’, but six ‘Weak’ performances, the first quarter of FY25 for global fashion ended as a ‘Weak’ quarter that also saw Trump introduce a newly revised and increased tariff regime. All eleven fashion companies in this list, wary of the direct and indirect impacts of the new tariffs, showed prudence in their outlook for the year ahead.

Strong: Growth In Both Sales & Profits

Delta Galil Industries (TLV: DELT)

In the third week of May, Caesarea-headquartered Delta Galil Industries Ltd, the global designer, manufacturer and marketer of branded and private label intimate, activewear, loungewear and denim apparel for ladies, men, and children, reported strong financial results for the first quarter (Q1) ended March 31, 2025.

Sales for the quarter increased by 11 per cent to a first-quarter record of $498.7 million, driven by growth in all segments and channels. This increase included a 21 per cent rise in online sales of the company’s own brands.

Gross profit, amounting to $202.6 million, increased by 6 per cent compared to $190.5 million last year. EBIT before non-core items increased by 11 per cent and stood at $32.7 million (up from $29.4 million last year). The increase in net income was 46 per cent to $17.6 million, while net income excluding non-core items, net of tax, increased by 22 per cent compared to $14.5 million in the first quarter of 2024.

To offset the effects of the new tariffs, the company is sharing the impact with its long-term vendors and strategically optimising its sourcing and production in countries with lower exposure to tariffs. Based on current tariff rates, the company estimates the potential impact on 2025 annual operating income will not exceed $20 million. In addition, it is taking proactive measures to reduce annual operating expenses by $5–7 million.

Azzas 2154 SA (BVMF: ARZZ3)

In its announcement during the first week of May, Azzas (the new name of Arezzo&Co) reported pro forma results for the first quarter.

Gross revenue for the reported quarter stood at BRL 3.311 billion (~$587.87 million), compared to BRL 2.894 billion in Q1 FY24, up 14.4 per cent. For continuous brands, the comparable revenues were BRL 3.260 billion (~$578.81 million) and BRL 2.808 billion (Q1 FY24), up 16.6 per cent. This growth is attributed to the strong performance of Women’s Apparel, which rose by 27.1 per cent; continued strong growth in Democratic Apparel, up 19.4 per cent; and solid growth in Men's Apparel, which registered a 12.6 per cent increase.

As a result of the merger of SOMA Group into Arezzo&Co, Azzas 2154 began consolidating SOMA Group’s results in Q3 FY24, starting in August 2024. Since Q4 FY24, the company’s financial statements have reflected three months of consolidated operations.

Net profit for the first quarter increased from BRL 101.8 million in the same quarter of the previous fiscal to BRL 117.8 million (~$20.91 million), up 15.6 per cent.

Azzas is the largest fashion group in Latin America. Following the completion of its brand portfolio review, announced on December 9, 2024, the brands Alme, Dzarm, Reversa, Simples, and TROC were discontinued, while Baw was resold to its original founders.

Burlington (NYSE: BURL)

At the end of May, NYSE-listed Burlington reported a 6 per cent increase in total sales for the first quarter, amounting to $2,500 million, although comparable store sales remained flat compared to Q1 FY24.

Burlington Stores, Inc, a Fortune 500 company, is a nationally recognised off-price retailer of high-quality, branded apparel, footwear, accessories, and home merchandise at everyday low prices.

The gross margin rate for the first quarter ended May 3, 2025, as a percentage of net sales, was 43.8 per cent, compared to 43.5 per cent last year—an increase of 30 basis points. Merchandise margin expanded by 20 basis points, while freight expenses improved by 10 basis points as a percentage of net sales.

Net income stood at $101 million, or $1.58 per share, compared to $79 million, or $1.22 per share, for the first quarter of fiscal 2024. Adjusted net income was $107 million, or $1.67 per share, compared to $91 million, or $1.42 per share in Q1 FY24, excluding $4 million of expenses in each period (net of tax) associated with bankruptcy-acquired leases.??

The company projected second quarter as well as full year guidance too.

For the second quarter of FY25, the company expects total sales to increase in the range of 5 to 7 per cent; comparable store sales to increase in the range of 0 to 2 per cent; adjusted EBIT margin to be in the range of down 30 basis points to flat; and adjusted EPS in the range of $1.20 to $1.30, versus the second quarter of FY24.

The projections for the company’s full-year ending January 31, 2026 includes: total sales increase in the range of 6 to 8 per cent; comparable store sales increase in the range of 0 to 2 per cent; adjusted EBIT margin increase in the range of 0 to 30 basis points; and adjusted EPS in the range of $8.70 to $9.30.

Moderate: Growth In Either Sales Or Profits

Ross Stores Inc (NASDAQ: ROST)

Nasdaq-listed Ross Stores, Inc reported earnings per share (EPS) of $1.47 for the 13 weeks ended May 3, 2025, compared to $1.46 for the 13 weeks ended May 4, 2024.

Ross Stores’ net income for the first quarter was $479 million, down from $488 million in the same quarter last year, reflecting a decline of 1.8 per cent. Sales for the first quarter of 2025 stood at $4.98 billion, compared to $4.86 billion last year—an increase of 2.98 per cent—while comparable store sales remained flat year-on-year.

The increase in sales but decline in profit placed Ross Stores in the moderate performer category.

For the second quarter ending August 2, 2025, the company projects comparable store sales to be flat to up 3 per cent, on top of a 4 per cent gain in the second quarter of the previous year. Earnings per share for the second quarter are projected to be in the range of $1.40 to $1.55, compared to $1.59 in the prior year period ended August 3, 2024. This earnings guidance includes an estimated $0.11 to $0.16 per share cost impact from announced tariffs.

Ross Stores, Inc is an S&P 500, Fortune 500, and Nasdaq 100 company headquartered in Dublin, California. Its store count increased from 2,127 in 2024 to 2,205.

Marks & Spencer Group Plc (LON: MKS)

British Marks & Spencer delivered a third consecutive year of growth and maintained a strong balance sheet, yet ended fiscal 2025 under moderate performance due to a decline in PAT.

While statutory revenue grew from £13,040.1 (~$17,644.65) million to £13,816.8 (~$18,695.61) million, up 6 per cent, and sales increased from £13,109.3 million to £13,914.3 million, up 6.1 per cent, PAT declined by 31.3 per cent—from £425.2 million to £291.9 million.

Fashion, Home & Beauty sales rose by 3.5 per cent to £4.2 billion, with like-for-like (LFL) sales up by 4.4 per cent. The segment’s adjusted operating profit reached £475.3 million, up from £437.5 million in the first quarter of last year, representing a margin of 11.2 per cent of sales.

Meanwhile, the full-year dividend increased by 20 per cent to 3.6p, supported by a strong balance sheet that included £443.3 million in free cash flow from operations and £437.8 million in net funds, excluding lease liabilities.

From FY26, Ocado Retail Limited will be consolidated into the results of M&S in accordance with the JV agreement and will align with M&S’s year-end accounting period. The reported results therefore covered the 57 weeks to April 6, 2025, and included M&S Group’s share of an adjusted loss of £28.7 million.

In the year ahead, the company will increase its focus on improving delivery efficiency and maximising capacity utilisation within its existing network—critical to enhancing productivity and profitability before investing in new capacity. This includes migration to the Ocado Smart Platform (OSP) across e-commerce, last-mile, supply chain, customer hub, and trading systems.

Weak: No Growth In Sales & Profits

Ludwig Beck am Rathauseck - Textilhaus Feldmeier AG (ETR: ECK)

The Munich-based fashion group Ludwig Beck reported a year-on-year sales decline of around 2.4 per cent in the first quarter of 2025, according to its mid-April press release.

In the first three months of fiscal 2025, ended March 31, the German group generated gross merchandise sales of €18.3 million (~$20.89 million), compared to €18.7 million in Q1 FY24. This included €14.2 million in sales from the textile segment, which remained on par with the previous year. In the non-textile segment, sales totalled €4.1 million, compared to €4.5 million last year. The decline in sales was attributed to the conversion of key brands from the own-buy model to the concession model in April 2024, which were fully included in sales in the prior-year period. In online retail, Ludwig recorded year-on-year sales growth in the fashion segment.

Despite the slight decline in sales compared to the previous year, gross profit was maintained at €7 million, supported by lower markdowns on AW merchandise. The gross profit margin increased from 44.7 per cent in the prior year to 45.6 per cent. Due to falling interest rates in the capital markets, the financial result improved from negative €0.8 million to negative €0.7 million. Earnings before taxes (EBT) totalled negative €1.8 million (previous year: negative €1.7 million).

Earnings after taxes (EAT), or net loss, increased to €1.9 million compared to a loss of €1.1 million in the previous year.

American Eagle Outfitters (NYSE: AEO)

American Eagle Outfitters (AEO) released results for the first quarter ended May 3, 2025, in late May. According to the report, total net revenue of $1.1 billion decreased by 5 per cent, and total comparable sales—comprising a 4 per cent decrease in Aerie sales and a 2 per cent decline in American Eagle sales—fell by 3 per cent.

Gross profit for the reported quarter amounted to $322 million, representing a gross margin of 29.6 per cent of sales, compared to 40.6 per cent last year. Merchandise margins declined by 960 basis points, primarily due to inventory write-downs, higher in-season markdowns, and increased product costs.

The operating loss totalled $85 million, while the adjusted operating loss of $68 million excluded $17 million in impairment and restructuring charges, primarily related to the company’s supply chain network optimisation project.

Diluted loss per share was $0.36, and adjusted diluted loss per share was $0.29.

The NYSE-listed company’s outlook for the second quarter includes: revenue expected to decline by 5 per cent; comparable sales to decline by 3 per cent; gross margin to be down year-on-year; and operating income projected to remain in the range of $40 million to $45 million.

American Eagle Outfitters, Inc is a leading global specialty retailer with a portfolio of renowned apparel brands including American Eagle, Aerie, OFFL/NE by Aerie, Todd Snyder, and Unsubscribed.

Carter's Inc (NYSE: CRI)

Another NYSE-listed company, Carter’s, Inc, reported a first quarter net sales decrease of $31.7 million, or 4.8 per cent, to $629.8 million compared to $661.5 million in the same quarter last year. Attributing the decline to macroeconomic factors including inflation, elevated interest rates, and declining consumer confidence—which contributed to lower demand—the company reported net sales declines of 5.3 per cent, 4.3 per cent, and 4.9 per cent in the US wholesale, US retail, and international segments, respectively.

The Atlanta-based company, the largest branded marketer in North America of apparel exclusively for babies and young children, reported its first quarter fiscal 2025 results in April-end.

Net income for the quarter decreased by $22.5 million to $15.5 million, or $0.43 per diluted share, compared to $38 million, or $1.04 per diluted share, in the first quarter of fiscal 2024. Adjusted net income (a non-GAAP measure) also decreased by $14.3 million to $23.8 million.

Given the company’s recent leadership transition and significant uncertainty surrounding proposed new tariffs and their potential impact on the business, Carter’s suspended its forward guidance.

Dillard's Inc (NYSE: DDS)

Dillard’s, Inc, headquartered in Little Rock, Arkansas, was quick to announce its operating results for the first quarter on May 15, 2025.

Total retail sales decreased by 2 per cent; net sales for the 13 weeks ended May 3, 2025, and May 4, 2024, were $1.529 billion and $1.549 billion, respectively. Net sales include the operations of the company’s construction business, CDI Contractors, LLC. Comparable store sales decreased by 1 per cent.

Although operating expenses were reduced to $421.7 million, or 27.6 per cent of sales, compared to $426.7 million, or 27.5 per cent of sales in 2024, Dillard’s reported net income of $163.8 million, or $10.39 per share, for the 13 weeks ended May 3, 2025, compared to $180 million, or $11.09 per share, for the 13 weeks ended May 4, 2024.

Retail gross margin was reported at 45.5 per cent of sales compared to 46.2 per cent last year, while ending inventory increased by 6 per cent.

The company operates 272 Dillard’s stores, including 28 clearance centres, across 30 states, totalling 46.3 million square feet, along with its online store dillards.com.

No guidance for the second quarter or the full year ahead was announced.

Kohl's Corp (NYSE: KSS)

Like Dillard’s, Kohl’s Corporation was also quick to report results for the first quarter ended May 3, 2025, by the end of May. Comparisons were also similar: the 13-week period ended May 3, 2025, versus the 13-week period ended May 4, 2024.

Kohl’s net sales decreased by 4.1 per cent to $3 billion for the first quarter, with comparable sales down 3.9 per cent. Gross margin, as a percentage of net sales, was 39.9 per cent—an increase of 37 basis points.

Selling, general and administrative (SG&A) expenses decreased by 5.2 per cent to $1.2 billion (36 per cent of total revenue). Operating income was $60 million (1.9 per cent), up from $43 million in the prior year. Net loss stood at $15 million, or negative $0.13 per diluted share, compared to a net loss of $27 million, or negative $0.24 per diluted share, in the prior year.

For the full year 2025, the company expects: a net sales decrease of 5 to 7 per cent; a comparable sales decrease of 4 to 6 per cent; operating margin in the range of 2.2 to 2.6 per cent; and diluted EPS in the range of $0.10 to $0.60.

Kohl’s is a leading omnichannel retailer that operates more than 1,100 stores in 49 states, along with its online store Kohls.com and the Kohl's App.

Macy's Inc (NYSE: M)

Macy’s first-quarter highlights include: net sales of $4.6 billion, which exceeded the company’s prior guidance range, yet registered a decrease of 5.1 per cent; comparable sales were down by 2 per cent on an owned basis and 1.2 per cent on an owned-plus-licensed-plus-marketplace basis. Both figures surpassed the company’s prior guidance and benefitted from better-than-expected performance across all nameplates—Macy’s, Bloomingdale’s, and Bluemercury.

Bloomingdale’s reported comparable sales growth of 3 per cent on an owned basis and 3.8 per cent on an owned-plus-licensed-plus-marketplace basis. Bluemercury reported comparable sales growth of 1.5 per cent—marking its 17th consecutive quarter of comparable sales growth.

Net income was $38 million, or 0.8 per cent of total revenue, and adjusted net income was $46 million, or 1 per cent of total revenue.

The company returned approximately $152 million to shareholders, consisting of $51 million in quarterly cash dividends and $101 million in share repurchases.

The company made no changes to its full FY25 guidance, originally issued on March 6, 2025, regarding net sales, comparable owned-plus-licensed-plus-marketplace sales, and go-forward business comparable owned-plus-licensed-plus-marketplace sales. However, adjusted EBITDA and core adjusted EBITDA, as a percentage of total revenue, were lowered to 7.4 to 7.9 per cent and 7 to 7.9 per cent, respectively. The adjusted diluted EPS range was also reduced to $1.60 to $2.00.

Macy’s is headquartered in New York City.

ALCHEMPro News Desk (WE SB)