Dive Brief:

• Apparel retailer Aritzia is weathering additional costs due to the elimination of the U.S. de minimis exemption and adjustments to fulfillment the company made to mitigate the impact, CFO Todd Ingledew said on a Q3 earnings call Jan. 8.
• Gross profit margin increased 30 basis points year over year, despite 410 basis points of pressure coming from trade-related challenges, Ingledew said. The CFO attributed one-third of the headwind to the elimination of de minimis, with the remainder tied to tariffs.
• "This pressure was more than offset by leverage on fixed costs, improved markdowns and freight tailwinds," Ingledew said.

Dive Insight:

The end of the de minimis exemption in August drove e-commerce supply chains to revamp their fulfillment strategies. The trade policy enabled imports valued below $800 to enter the U.S. duty and tax free, limiting expenses for low-cost shipments. Without it, apparel retailers such as Aritzia and Lululemon — reliant on cross-border shipping for direct-to-consumer orders — are racing to reduce their exposure to the Trump administration’s tariffs.

When de minimis was in effect, Aritzia used its supply chain network in Canada to fulfill a portion of its U.S. e-commerce orders, CEO Jennifer Wong said during an Oct. 9 earnings call. After the exemption's elimination, Aritzia relocated all U.S. order fulfillment to its Ohio distribution center, which it expanded in 2024 to more than double its previous size.

"We are now operating at triple the capacity compared to prior to the de minimis removal," Wong said. "And eventually, further optimization will allow us to quadruple our prior capacity. More importantly, there was no impact on the exceptional client service for which we are known and loved. This will allow us to handle U.S. order volume for the next two years."

Mitigation strategies have helped Aritzia offset de minimis pressure and tariff-related costs this year, although limiting the impact comes with its own costs. The company endured transitory expenses in Q3 from the shift to having all its U.S.-bound orders fulfilled domestically, Ingledew said on the Jan. 8 call.

Additionally, the trade challenges aren't in the rearview mirror for Aritzia just yet. Gross profit margins in Q4 could similarly face about 400 basis points of pressure due to de minimis' end and tariffs, according to Ingledew.