By Juveria Tabassum
Feb 5 (Reuters) – From increased ad spend, Wimbledon tie-ups to price hikes, U.S. retailers like Estee Lauder and Ralph Lauren are pulling out all stops to corner a slice of a market increasingly split along income lines as they try to shake off tariff pressure.
Consumer-facing companies were among the worst-hit last year as U.S. President Donald Trump’s tariff policies hammered demand and hiked input costs. Now, they are tweaking their strategy to cope and that means spending more money.
Apparel, accessories and cosmetics companies are targeting higher-income households with marketing and investment in a more premium product as they splurge on nice-to-have items, while lower- and middle-income consumers are strained by higher costs for rents and food amid a softer job market.
Coach-parent Tapestry delivered yet another quarter of margin growth on the back of its Tabby handbags, despite increasing marketing spending by about 40%, and with tariff impacts starting to show for Kate Spade.
Coach’s ad campaigns have featured Gen-Z celebrities such as Elle Fanning, Lilas, Omar Apollo, and Kōki over the past six months. The company said it acquired over 3.7 million new customers globally in the quarter, about one-third of which were Gen-Z.
“These investments are helping solidify our brand building,” Tapestry CEO Joanne Crevoiserat said.
The investments also come as tariff-hit products start to flow through companies’ inventories, and impacts from the duties peak in the next few months.
While Tapestry’s shares rose 7% on Thursday, investors were more skeptical about similar jumps in marketing spend from Estee Lauder, Ralph Lauren and Canada Goose.
“For those who were unstable for a while, there is a higher chance of some risky earnings reports,” said Illia Kyslytskyi, portfolio manager at Singapore-based Yaru Investments.
“In terms of marketing budgets, companies should be aware of a possible decline in the affordable luxury segment demand.”
Estee Lauder is leaning into premium fragrances and cosmetics categories, rolling out new luxury price tiers, and boosting its marketing under CEO Stephane de La Faverie’s turnaround efforts as it recovers from a tough couple of years due to weak demand and rising input costs.
Estee expects a $100 million tariff hit to its annual profit in the second half of the year, and current-quarter margins to contract 50 basis points. Its shares dropped 20% on Thursday.
New York City-based Ralph Lauren saw quarterly operating costs jump 12% year-on-year as it ramped up brand building efforts through campaigns such as Wimbledon and the U.S. Open tennis championship.
The company forecast margins to shrink about 80 to 120 basis points in the current quarter amid increased spending and a tough operating environment in North America.
Canada Goose fell short of quarterly profit expectations, causing its shares to crater. The company has still not reinstated forecasts it pulled in May due to tariffs. At the same time, it has increased investments in marketing and is expanding its product line.
“We think they also need to reinstate quarter out or at least annual guidance to provide confidence in the investment community that the continued increase in spend will normalize so that earnings stop declining,” said BNP Paribas Equity Research senior analyst Laurent Vasilescu.
(Reporting by Arpan Varghese, Juveria Tabassum, Sanskriti Shekhar and Savyata Mishra in Bengaluru; Editing by Maju Samuel)
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