Eleven logistics companies in Mexico are losing the permits that let them clear cheap parcels in bulk. Two are already gone. DHL, UPS and FedEx are on the clock. And one online retailer is saying out loud what that means for its customers. Good morning, this is Fashion Business Daily. It's Thursday, October 29, and there are three stories today. Shein warns that a stalled permit renewal in Mexico puts its business there at risk. Adidas publishes the full version of its record third quarter, and the detail is in apparel. And VF Corporation beats its own guidance, with Vans selling direct to shoppers again.
Carolina Millán, Gonzalo Soto and Valentine Hilaire, reporting for Bloomberg, carried by The Business of Fashion:
Shein’s communications director, Patrick Lassauzet, said “a reduction in authorised operating capacity under the T1 framework can quickly turn into a real problem for consumers.”
Bloomberg first ran this on Wednesday, October 28. T1 is a Mexican customs framework that, according to the tax authority, lets couriers import shipments worth up to 2,500 dollars per recipient on streamlined terms. Eleven operators have started losing those authorisations. Two permits expired this month, including one held by Conejo Corriendo, the local arm of J&T Global Express, which delivers for Temu and AliExpress. Welldex Trading lost its permit too. DHL, UPS and FedEx expire on Wednesday, December 2, and Estafeta on Tuesday, December 22. And Shein won't say which of its carriers are on that list. Which tells you something. What Shein did say is that a problem at one logistics provider earlier this year hit about 200,000 orders, and it had to issue refunds after long delays. It says it supports compliance with customs rules and wants a timely and transparent resolution. The customs council in charge of renewals hasn't said whether it will renew. It told Bloomberg decisions come at monthly meetings, and it wouldn't say when the next one is. A monthly meeting with no date, and a December deadline for the three biggest couriers in the world. That's how you end up with parcels sitting in a warehouse at Christmas. The cost estimates come from one side of the debate, so let's say who's making them. Senator Luis Donaldo Colosio, from the opposition Movimiento Ciudadano, estimates expiry could cost the government 33 billion pesos, about 1.8 billion dollars, in tariff revenue next year, and put more than 66,000 jobs at risk. A trade consultant at Tecnológico de Monterrey, Ignacio Casas, calls letting the permits lapse irresponsible. He also says authorities may want tighter controls after abuse under T1, such as companies understating what shipments are worth. That second point matters. Mexico has already raised taxes on apparel from countries like China that have no trade deal with it, to protect local makers. A slow renewal can do the job of a tariff without anyone voting for one. That's an inference, and the council hasn't explained its thinking. The context for Shein is clear, though. The end of the US de minimis exemption hurt it, Bloomberg says Latin America may be where it tries to make up for a decline in the US, and last week we covered its 100 million dollar FTC settlement. It went public in Hong Kong this year in a 1.7 billion dollar offering. The US door closes, so you go south, and now the door to the south is getting stuck too.
Bloomberg, on the full third-quarter numbers Adidas published today:
Apparel revenue grew by 19% on a constant-currency basis while sports gear increased 14% in the third quarter, led by running, training and football products, the company said Thursday, elaborating on preliminary results published last week. That compensated for the lack of growth in its footwear division, where the lifestyle business continues to struggle amid mass discounting taking place across the industry.
We went through the headline figures last week. Adidas released preliminary results on Tuesday, October 20: revenue of 7.25 billion euros, up 9 percent, and operating profit of about 1 billion euros, up 37 percent, the first billion-euro quarter in its history, according to Global Brands Magazine. Today's statement shows where that growth came from. Apparel is growing, footwear was flat, and lifestyle sneakers are in a discounting market. So the Samba wave is cooling, and the clothes are doing the work. Gulden said it himself in the annual report, that the Three Stripes moved from footwear to apparel. Honestly, the track tops are better product than half the retro sneakers on the wall right now. By region, Bloomberg says growth was double digit across much of the world, with surprisingly strong sales in Greater China and North America. Europe fell 4 percent, partly because of weak wholesale. Adidas says it expects the lifestyle footwear pressure to ease. Every brand expects things to ease. Then here's the caveat on margins. Part of the quarter came from roughly 200 million euros in US tariff refunds. Global Brands Magazine says gross margin rose 2.5 points to 54.3 percent, and Adidas credits the refund along with what it calls healthy full-price sales. It raised its full-year operating profit outlook to about 2.5 billion euros, and it plans to reinvest about 100 million euros in the fourth quarter. Full price is the whole story against Nike. Bloomberg says Adidas is selling at full price while rivals, Nike included, go to markdowns. Nike's last quarter was 11.2 billion dollars, down 4 percent. Take the refund out, and the apparel and performance numbers still carry the quarter. The thing to watch is whether lifestyle footwear stabilises, as Adidas says it will, before the reinvestment starts weighing on margins.
Bracken Darrell, VF Corporation's chief executive, in the company's second-quarter release:
global DTC is growing again for the first time in almost five years, and strong orders from Wholesale partners continue to give us confidence of a second half improvement.
He's talking about Vans. VF reported on Wednesday, October 28, for the quarter that ended September 26. All of these figures are company-reported. Total revenue fell 4 percent. Strip out Dickies, which VF sold to Bluestar Alliance last November, and revenue rose 1 percent in constant currency, against guidance of flat. Adjusted operating income excluding Dickies was 364 million dollars. VF had guided to about 315. And Vans itself? Down 9.8 percent. The direct business returned to growth, and VF expects wholesale to improve in the second half. The North Face rose 4 percent, Timberland rose 4 percent, and Altra, the running shoe, grew more than 40 percent. So the brand whose comeback gets the headline fell almost 10 percent. I'll give them this, though. Direct growth is the signal that matters, because that's shoppers choosing Vans themselves, not a store buyer stocking up. Fine, I'll say it. Altra up 40 percent is the most interesting line in the release. The margin story is real on paper. Gross margin was 55.4 percent, up 320 basis points. Net debt fell 1.1 billion dollars, or 20 percent. Two things to keep an eye on. Inventories are up 7 percent, which VF says is to support second-half demand. And the full-year guidance, which it reaffirmed, is modest: revenue up 2 percent or better in constant currency and an adjusted operating margin of about 8 percent. Put it next to Adidas. One company is selling apparel at full price and booking record profit. The other has a skate shoe that's still shrinking, and it's calling that progress. You can't cost-cut Vans back into being cool. The product has to do it. Darrell's release says product design is what drove the quarter. If Vans wholesale actually turns in the second half, that will show up in the next two reports.
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My bet for December 2: the big three couriers get their renewals, and the small Mexican operators are the ones left waiting. We'll check that bet when the date comes. That's Fashion Business Daily for Thursday, made by Lantern Podcasts. We'll be back tomorrow, Friday, October 30.