Farm Rio Raises Prices, Slows Exports to US
A Brazilian fashion company that's known for colourful prints sported by celebrities including Justin Bieber and Beyoncé is selectively raising prices to cushion the impact of tariffs while scaling back exports to the US.
Azzas 2154 SA, owner of the Farm Rio brand, has already increased some prices in the US and is considering shifting parts of its production to Europe from China, chief executive officer Alexandre Birman said during an interview at Bloomberg's headquarters in New York.
'We don't know where tariffs will stop, but we've temporarily slowed US-bound imports,' Birman said.
Azzas, one of Brazil's largest apparel exporters, is navigating turbulence in both the US and its home market, where high interest rates have fueled concerns about demand. Globally, sales for mid-tier fashion-focused brands have largely held up, but companies have warned the outlook for the second half is unclear.
Brazil's apparel sales have remained healthy so far this year, but Azzas' international expansion may be hindered by higher tariffs. There's also opportunity: Birman sees an opening for Brazilian footwear manufacturing as companies look for alternative sourcing countries to avoid US duties.
'If tariffs on Chinese goods rise above 50 percent, we become competitive,' he said. 'In that case, we'd need to accelerate investments to expand local output, as China's production quality has improved significantly in recent years.'
The US hiked tariffs to as high as 145 percent before they were scaled back to 30 percent for 90 days as the countries work toward an agreement. US President Donald Trump has also raised tariffs for countries across the board, and threatened the EU with a levy of 50 percent if no deal is reached.
US states and small businesses are challenging the levies at the US Court of International Trade, which earlier ruled against the tariffs. A federal appeals court has temporarily allowed the tariffs to continue, but US trade policy will ultimately be decided by a combination of court rulings and trade negotiations between the US and foreign countries.
In subsequent comments to Bloomberg, Birman said that Trump's policies have are causing uncertainty.
If duties continue to rise, Azzas may move apparel production to Turkey or Portugal — a shift that would also support the European rollout of its Farm Rio brand. The company currently has a limited number of stores in the region. It's also looking to expand in the Middle East, Mexico and South America.
The Farm Rio brand has six stores in the US and more than 100 in Brazil.
Azzas, which was formed from the 2024 merger of Arezzo and Grupo Soma, has seen only a 'small impact' from tariffs so far, Birman said. The Belo Horizonte, Brazil-based company is focused on accelerating synergies and improving its cash flow as it merges operations. The group is streamlining operations with an eye on return on invested capital, he added, and hasn't ruled out deals related to its brands.
The company also owns high-income brands including Animale, Maria Filó, Cris Barros and Fábula, among others. Birman also has a brand under his own name that sells shoes costing from $400 to $1,000. Actress Emily Blunt wore the shoes during the 2023 Oscar awards. Quarterly Results
The integration is starting to deliver results, Birman said, with gains expected as the company streamlines logistics and shipping operations and combines areas such as e-commerce and customer service. In the first quarter, revenue rose sharply from a year earlier.
Investors are watching closely for signs of progress. Ruben Couto, an analyst at Banco Santander, said in a recent note to clients that the company's negative operational cash flow and high capital expenditures contributed to higher debt last quarter.
To counter this and instil financial discipline, employee bonuses are now tied to Azzas' free cash flow, Birman said. Management also plans to lower capital expenditures by 120 million reais ($21 million) next year by reducing spending on technology and opening new stores via franchisees.
Birman downplayed a report from Valor Econômico, a Brazilian newspaper, that there's tension with Grupo Soma founder Roberto Jatahy.
'There are points of divergence that generate interesting debates,' Birman said of his relationship with Jatahy. He added that 'everything is governed by a valid agreement, including a 10-year lock-up plan, to uphold its terms.'
Last year, the company's major shareholders agreed to a lock-up plan that restricts the sale of their stakes except in specific cases.
Birman and Jatahy are major shareholders in the combined entity, and Soma generates about 30 percent of revenue. Azzas' Brazil-listed stock has advanced more than 50 percent so far this year, with much of the jump following the company's first-quarter earnings release last month.
Birman added he has a 'deep: relationship with Farm Rio's founders, Katia Barros and Marcello Bastos.
'We have a fashion connection, there's a constructive relationship with strategy to improve the business,' he said.
By Rachel Gamarski
Learn more:
Why Tariffs Haven't Led to Soaring Prices – Yet
Fashion brands will eventually need to offset higher costs for imports. But after raising prices again and again since the pandemic, some retailers are more worried about alienating shoppers than how they'll pay their customs duties.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
USA Today
22 minutes ago
- USA Today
The businesses that are, and aren't, shifting production under Trump's tariffs
New York-based manufacturer Gear Motions purchases the majority of its parts from U.S. suppliers, with roughly 4% of inputs imported from other countries. It's a small fraction, but with a 10% base tariff in effect since early April, President and CEO Dean Burrows said his company, which specializes in custom cut and ground gears, will have to pass down those price increases to customers. That's not for lack of trying to find new suppliers. 'We have not been able to find a U.S. source that can make the product, and we have searched globally,' Burrows said. Tariffs are meant to fix that, with the Trump administration aiming to 'reverse the decades of globalization that has decimated our industrial base,' according to an April White House press release. But reviving the U.S. manufacturing base would take years, and economists have doubts that President Donald Trump's tariffs will be enough to bring it back to its former glory. Meanwhile, many U.S. manufacturers that rely on imports may be more likely to pass on tariff costs to consumers than reshore their supply chains. Nearly one-third of U.S. manufacturers' intermediate inputs are imported from other countries, according to a 2022 report from the Commerce Department. 'In the short run, it's going to hurt manufacturers. It's going to hurt the factory owners. It's going to hurt the workers,' said Nancy Qian, an economics professor at Northwestern's Kellogg School of Management. 'And that's on top of the pain the workers will feel when they go to the store and need to pay more for their imported (items).' Why shifting to US suppliers isn't always an easy solution Trump's tariffs are meant to position the U.S. as a 'global superpower in manufacturing' by drawing in new factories and manufacturing investments. 'The president has said early and often that the best way to avoid tariffs is to just come here and produce," Trump's top trade adviser, Peter Navarro, told CNBC in early April. 'We're going to get to a place where America makes stuff again.' But moving supply chains to the U.S. can be costly. Nearly two-thirds of 380 surveyed companies say building a new domestic supply chain would at least double their current costs, according to an April CNBC survey. Sixty-one percent said it would be more cost-effective to relocate to a lower-tariffed country. 'If the U.S. continues its focus on China, it will be successful in moving production out of China to some extent, but it won't move so much of it back to the U.S.,' Qian said. 'There are many other countries out there that can manufacture at costs lower than the U.S.' Even if tariffs boost U.S. manufacturing, it'll take years for new factories to get up and running. That could leave U.S. companies searching for domestic suppliers struggling in the meantime. Take 000Skin, a beauty company launched by Hannah Chang earlier this year. While 000Skin is based in New York, Chang has been sourcing the containers for her skin care products in China, where she says manufacturing capabilities are unmatched. 'I think people are not aware how much work and infrastructure even creating a plastic jar takes,' Chang said. But rising import costs from tariffs have thrown her for a loop. Chang has looked for alternative suppliers in the U.S., but says she has yet to find options that match the quality and price of what Chinese manufacturers can supply. She's considered shifting to a Mexican producer, but said it's been difficult finding one willing to work with smaller businesses. 'I'll probably just continue to look at China-based partners,' Chang said, adding that she's considering raising prices to cover at least some of the 30% tariff rate. Courtney Rivenbark looked into working with U.S. manufacturers when she created her apparel and jewelry brand, Coco Clem, in 2018. The high production costs turned her away, and she eventually pivoted to a partnership with a Chinese factory she said aligned with her ethical and environmental goals. 'China is just very advanced with their machines and equipment and technology,' Rivenbark said. 'The whole supply chain exists in China – the knits, the yard, the GOTS (Global Organic Textile Standard) certified organic cotton yarn.' After Trump announced new tariffs earlier this year, Rivenbark said she compared pricing from China with U.S. manufacturers. She said it would cost her three times more to create the same sweater in the U.S., and local manufacturers didn't have the technology to create certain garments in plus sizes. 'I would move (production to the U.S.) if the infrastructure was here,' Rivenbark said. But 'it's just so much more expensive. ... I'm not really interested in moving it outside of China because of a potential short-term policy switch.' How many factories, jobs are coming to the US? That's not to say tariffs aren't pressuring some businesses to increase their investments in the U.S. Whether those moves will lead to a dramatic influx of manufacturing jobs is another question. Cra-Z-Art – a New Jersey-based manufacturer that produces toys, activities and school supplies – in March announced plans to grow production space by 50% to 1.5 million square feet to combat the cost of tariffs. Lawrence Rosen, chairman of Cra-Z-Art, said it's too early to say how many jobs the move will create, but the company is looking to use automation 'wherever possible' to reduce direct labor costs. 'I need to control my 102-year-old company's destiny by controlling its future and not relying on global tariffs when things could change daily,' Lawrence said. 'By manufacturing in the USA, we save on freight, we save with automation. ... With automation, we can produce many of our products at a similar cost compared to increased costs with even 10% tariffs on freight.' A White House website claims Trump's policies have spurred trillions of dollars in new U.S. manufacturing investments that are 'fueling job growth, innovation, and opportunity across every corner of the country.' A number of those investments were in the works before Trump took office. A $5 billion investment from automaker Stellantis, for instance, includes plans to restart an idled plant in Belvidere, Illinois, to make trucks, a deal first announced in 2023. While there were talks of delays in 2024, the company in January confirmed that it would stick to the 2027 opening agreed to in union negotiations years prior. And a spokesperson for German medical technology company Siemens Healthineers, another company listed on the website, told USA TODAY that several of the initiatives included in its $150 million investment in new and expanded U.S. facilities have been underway for 'well over a year," although projects were accelerated to address rising economic and geopolitical uncertainty. Michael Strain, director of economic policy studies at the American Enterprise Institute, a conservative think tank, doesn't expect to see much reshoring tied to tariffs. 'For a business to set up a factory in the United States, that's a 10-year investment or longer,' Strain said. 'How can a business possibly know whether or not that would be profitable if tariff rates are changing every week?" Some data suggests the domestic manufacturing industry has actually taken a hit from tariffs, with trade policy uncertainty prompting some companies to tighten their purse strings. Economic activity in the manufacturing sector contracted in May for the third consecutive month to reach its lowest level since November, with both orders and output contracting, according to a survey by the Institute for Supply Management. Meanwhile, the manufacturing sector lost about 8,000 jobs between April and May despite an overall increase in employment, according to the Labor Department. Susan Helper, an economics professor at Case Western Reserve University in Ohio who served on the White House staff in both the Obama and Biden Administrations, believes tariffs can be a useful tool, but the uncertainty surrounding trade policy has been 'a real problem.' "I think what companies are doing is just not investing anywhere in anything and just waiting to see how things shake out,' she said.
USA Today
22 minutes ago
- USA Today
Tariffs are meant to boost US manufacturing. Is America ready?
Winton Machine, an Atlanta-based manufacturer, is desperate to hire. So far, there are few takers. CEO and co-founder Lisa Winton has been searching for a salesperson since March. A mechanist job has been open even longer, with less than a dozen applications over the past year – none of whom had the skillset required for the job. Winton has done what she can to attract workers, like forming a relationship with local technical colleges, offering applicants flexible hours and rehiring retirees. Still, keeping her staffing up has been a challenge. The push for more domestic manufacturing through tariffs, Winton worries, will only make matters worse. 'If more factories move into an area, who are they competing with? They're competing with other factories," she said. "Whether it be machinists or maintenance or assembly, all of the different types of jobs that are available – they have to come from somewhere.' President Donald Trump has said his tariffs, which range from a 10% baseline tariff on trade partners to 50% on steel imports, will have jobs and factories 'come roaring back.' 'The end game is to have production here. Any country that wants to produce here doesn't pay a tariff. That's the ultimate solution,' Trump's top trade adviser, Peter Navarro, told ABC News in early April. It's not clear that America is prepared for that shift. Building new manufacturing facilities can take up to 10 years, depending on the industry, and experts say the country's infrastructure isn't primed to handle additional factories. Meanwhile, a manufacturing labor shortage could mean new factories have a hard time filling roles. 'If the Trump administration's vision is to bring manufacturing back to America en masse – not just in a few sectors, but en masse – that vision isn't realistic," said Nancy Qian, an economics professor at Northwestern's Kellogg School of Management. Why building factories will take time It's not clear how many businesses will shift production to the U.S. because of tariffs. Those that do reshore face a lengthy process. 'Most companies do not make a decision to onshore or to build a new factory or plant lightly,' said Erin McLaughlin, a senior economist at the Conference Board, a nonprofit business-research group. 'This is something for most companies that they strategize many years in advance.' First, companies must figure out where to build. The location needs to be close to transportation corridors, good water supplies and on a stable electric grid – something easier said than done with current U.S. infrastructure, which earned a C in its 2025 report card from the American Society of Civil Engineers, according to McLaughlin. Then, companies must purchase the land, obtain proper permits and inspections, design their factory, purchase equipment and select a construction team. Only then can they start construction. The process generally takes three to 10 years, depending on the industry, McLaughlin said. Certain projects can be done in less time, although the timeline can be challenged by growing competition for sites with access to a stable electric grid, according to Jeff Bischoff, chief sales officer at Lexington, Kentucky-based designer-builder Gray. 'Power generation is not keeping up right now with demand,' Bischoff said. 'All the utilities are doing their best to try to keep up and get ahead of that. But it's a several-year process.' Trump has acknowledged that infrastructure changes will be necessary, and believes it would take roughly two years to get his vision for manufacturing up and running. 'You've got to build a thing called a factory. You have to build your energy. You have to do a lot of things,' Trump said on April 7, adding that he would give businesses approvals for electric plants in 'record timing.' But McLaughlin believes a two-year turnaround for bolstering the U.S. manufacturing sector could be optimistic. Even if executive orders speed up federal approvals, she said, factories would likely still need to worry about state and local permits. More complications could arise if the Trump administration continues to crack down on immigration, with roughly 20% of manufacturing workers in the U.S. foreign-born, according to labor market analytics firm Lightcast. An even higher share – roughly 30% – are foreign-born in construction. "We don't want to be over reliant on one trading partner for certain things,' McLaughlin said. But 'I don't think the U.S. is prepped and primed for everything to be manufactured here.' Are tariffs worth the pain? Trump says the ultimate fruits of tariffs will be worth the pain. Experts disagree. Why manufacturers are struggling to hire Trump's push for more factories comes after a dramatic decline in manufacturing jobs. After accounting for roughly 22% of total nonfarm employment in 1979, manufacturing work makes up just 8% today. Even if tariffs were able to eliminate the entire U.S. trade deficit in manufacturing, that would still only bump that share up to about 10% of employment – still less than half of its share in the late 1970s, according to Robert Lawrence, a Harvard professor of international trade and investment and author of 'Behind the Curve: Can Manufacturing Still Provide Inclusive Growth?' 'Even in its most successful form, this is barely noticeable,' Lawrence said. Other experts warn that even that level of growth could exacerbate the hiring challenges manufacturers face today. Manufacturers have been struggling to fill jobs for years, including during a post-pandemic construction boom, when supply chain issues pushed more manufacturers to build facilities closer to home. The number of manufacturing establishments in the U.S. increased by more than 11% between the first quarter of 2019 and the second quarter of 2023, according to a 2024 report from Deloitte. Despite the growth, manufacturing jobs have remained essentially flat since 2019, discounting a pandemic-era dip. That's partially due to automation; factories today need fewer workers. But nearly half of manufacturers say attracting and retaining talent has been a major challenge, according to a first-quarter survey from the National Association of Manufacturers. Bureau of Labor Statistics data shows there were 381,000 manufacturing job openings as of April. By 2033, manufacturing could have 1.9 million unfilled jobs – roughly half of open positions – due to a skills and applicant gap, according to Deloitte. 'We absolutely do not have enough people ready to take these jobs,' said Rachel Sederberg, senior economist at Lightcast. 'That is going to be a very significant challenge if more and more manufacturing – or more and more of anything – comes back to the U.S.' One issue is that manufacturing workers are aging out of the workforce. Just over one-third of manufacturing employees in the U.S. are 55 or older and nearing retirement, according to a recent report from Lightcast, which is expected to make the shortage even more acute. And attracting new talent to backfill these positions hasn't been easy. As factories turn to more automation, manufacturers say they're having trouble finding talent with the right skillset to manage the more advanced technology. 'Not every manufacturing job today requires a degree, but every single manufacturing job today requires skills,' said Carolyn Lee, executive director of the Manufacturing Institute, a nonprofit focused on workforce development and education within the industry. Lee said obtaining those skills can take anywhere from a day or two for a forklift certification to up to four years of education and apprenticeship programs for maintenance technicians, one of the most in-demand manufacturing jobs today. There are some signs of renewed interest in trade jobs. Enrollment in public two-year institutions that focus on vocational programs was up 14% year-over-year in 2024, outpacing the 3% growth in public four-year schools, according to a May 12 Wells Fargo report. But Lightcast found there are still not enough students learning relevant skills to keep up with job demand. For instance, there were just 400 machinist program completions in Texas in 2023 compared to roughly 16,000 related job openings in the state. Research suggests manufacturing's reputation as dirty and dangerous has made the industry less appealing to younger Americans, especially amid a period of low unemployment. The Deloitte report says 'a different set of expectations' among millennial and Generation Z workers, many of whom were pushed to go to college instead of working in the trades, has made it difficult for manufacturers to attract and retain workers. 'The consensus among American manufacturers is this generation of Americans just don't want these jobs anymore," said Qian of Northwestern. Fear of lower wages may also be keeping workers away. Manufacturing work today can pay well, and some research finds it tends to pay better than other sectors that don't require college degrees. But as of 2018, the average hourly earnings for manufacturing employees fall short of average overall employee earnings, according to the Bureau of Labor Statistics. What kind of jobs would more manufacturing create? There's a reason so many American companies rely on factories abroad; operating in the U.S. tends to be more expensive. For one, labor costs are higher. Take the average annual machine operator salary, which is nearly $45,000 in the U.S. compared to $15,000 in China and less than $5,000 in Vietnam, according to the Reshoring Institute, a nonprofit that supports expanded U.S. manufacturing. And tariffs are expected to hike production costs for many domestic manufacturers, since companies will need to pay more for inputs shipped in from other countries. That could leave manufacturers increasingly turning toward automation to trim costs. 'If you need to pay anyone you employ as a factory worker an average of $36 an hour with benefits, then you are inclined to hire very few of them and instead buy automated equipment and robots,' said Farok Contractor, a professor at Rutgers' management and global business department. Winton of Winton Machine said she's already seeing an increased demand for automation from her company, which designs and produces factory automation for manufacturers in HVAC, aerospace, construction and other industries. Winton still expects to see jobs created if manufacturing gets a boost through tariffs. She just believes automation will allow fewer, high-quality positions as opposed to a large influx of manual labor. Already, manufacturing is relying on more college-educated workers; nearly 32% of civilian manufacturing workers had at least a bachelor's degree in 2023, up from 22% in 2006, according to a USA TODAY analysis of the Census Bureau's American Community Survey data. 'I need the people to build all the parts and pieces and the engineers to design and the software to build this factory automation,' Winton said. 'I think we have the people. Do we have the skillset? That's the question.'
Business Insider
39 minutes ago
- Business Insider
The CEO building the 'Ikea of factories' wants to democratize semiconductor production
In his 1986 book "Engines of Creation," engineer K. Eric Drexler — often called the godfather of nanotechnology — made a prediction. "The coming era of molecular machines will mean the end of many limits: the limit of scarcity, the limit of slow development, the limit of ignorance enforced by the lack of tools," he wrote. Reading those words a few years later, when he was 16, Matthew Putman started thinking. "Our bodies work as these little micro-machines where you have ribosomes and enzymes and things that are working and replicating and making things all the time, but our factories work the way that they've worked for the last hundred years," Putman told Business Insider he thought at the time. He wondered how a world would look "where you don't have large assembly lines, you don't have smokestacks, you instead just make things so perfectly," he said. Putman became fascinated by the possibilities of machines that are "atomically precise." It wasn't until the recent AI boom, however, that the idea really took off with fabrication plants. Putman, now 50, is the CEO of Brooklyn-based Nanotronics, which he cofounded with his father in 2010. The company started out building microscopes and tools to detect defects in semiconductors, among other materials. Now, it builds small, modular semiconductor manufacturing plants called Cubefabs. While the biggest fabs in the country are often millions of square feet in size, Cubefabs measure anywhere from 25,000 square feet for the smallest units up to about 60,000 square feet for a full-sized fab. They're adaptable, and the company says they can be assembled in under a year in most places on Earth. They're also smart — thanks to the power of AI — so they can self-monitor their production and improve in real time, the company said. And they're relatively cheap, costing a minimum of $30 to $40 million, compared to large fabs that can cost billions to build. With President Donald Trump back in the White House and pledging to reinvigorate US manufacturing, a new opening has emerged for Nanotronics — even as sweeping tariffs challenge companies that produce or depend on semiconductors. Putman says that in the long term, the tariffs will bolster domestic innovation. Tariffs "should be a wake-up call — a push to create something better than what either the US or China has done before," he told BI in a video interview from the Nanotronics headquarters in Brooklyn Navy Yard. "If we get this right, American innovation won't just protect our future — it could help redefine global progress in a way that benefits humanity." Putman says compact, modular factories are exactly that. "Your factory should be incredibly small," Putman said, gesturing to the room behind him. "Eventually, it could be the size of this room." The 'Ikea of factories' Semiconductor manufacturing has surged since the launch of ChatGPT. Global annual revenue for the industry is expected to reach more than $1 trillion by 2030, according to McKinsey & Company. In the US, despite legislation subsidizing domestic semiconductor production, fabs are more expensive to construct and maintain than those built in places like mainland China and Taiwan, McKinsey says. The US also suffers from a shortage of qualified labor, which can delay construction timelines, according to the firm. To attempt to solve some of these issues, Nanotronics teamed up with architecture firm Rogers Partners and engineering firm Arup to design compact factories. Each one runs with 37 people, but Putman says the ideal setup is four factories — about 180 workers total — which allows them to scale up without halting production. "It's like the Ikea of factories," Putman said. The company has raised $182 million to date from firms including Peter Thiel's Founders Fund. Cubefabs can be used to produce chips that span a range of uses across electronics applications, electric vehicles, and photodetectors for cube satellites, Putman said. "The more precise we make things, the more abundance we bring to the world," he said. "The business of making things grow bigger and bigger starts small — molecular small." Building on the foundational research of scientist Philippe Bove — now chief scientist at Nanotronics — the company also uses gallium oxide — a type of semiconductor that can handle more power than traditional materials like silicon — to produce advanced chips. The company plans to have its first installation set up in New York within the next 18 months. "These fabs do not require billions in capital expenditure or large populations of highly trained workers," Putman told BI in a follow-up email. "The vision is that any region — whether in the Global South or the United States — should be able to produce what it needs locally."
