Apparel, Footwear & Accessories Market Update – August 2025

M&A Activity Bifurcated and Directed Toward Best-in-Class Businesses as Sector Participants Await Tariff Clarity in the Apparel and Footwear Market

The Apparel and Footwear market has experienced substantial geopolitical and macroeconomic headwinds through year-to-date (YTD) 2025, resulting in subdued merger and acquisition (M&A) activity. The Apparel, Footwear & Accessories sector’s heavy reliance on manufacturing in markets impacted by tariffs has caused strategics to focus internally on tariff mitigation while pausing M&A playbooks temporarily. However, the de minimis loophole elimination may benefit middle market businesses and drive growth as Asia-domiciled e-commerce players that put downward pressure on pricing and heightened competition for wallet share now face margin erosion or price hikes. Sales growth across the sector has tapered despite a pull-forward of demand in early 2025. Business owners have kept a close eye on the health of consumer balance sheets, a trend expected to continue through year end.

The Apparel M&A market encountered several headwinds in the first half of the year – including tariffs, softening consumer sentiment, and broader economic uncertainty. However, early indicators suggest that the most challenging period may be behind us. We believe a compelling window may be emerging for private business owners to begin preparing for a sale process in late 2025 and into early 2026.

Jesse BetznerSenior Director, Capstone Partners

Consumer Spending Remains Under Pressure, Early 2025 Demand Rises ahead of Looming Price Hikes

Discretionary spending has remained a key point of discussion in the Apparel, Footwear & Accessories sector as business owners attempt to navigate the turbulent operating environment and source growth. Prolonged inflation and lingering high interest rates through year-end 2024 and into 2025 have continued to weigh on spending, particularly for low- and middle-income consumers. Public players in the sector have highlighted these factors as direct influences on spending patterns. “Based on a survey we conducted earlier this month…consumers are spending less due to increased concerns about inflation and the economy,” Calvin McDonal, CEO of lululemon athletica (Nasdaq:LULU), noted in the Q4 2024 earnings call.¹ Personal consumption expenditures (PCE) in the Clothing & Footwear category have experienced decelerating growth in the last three years, with 2024 seeing PCE rise by $12.6 billion year-over-year (YOY) compared to an increase of $17.3 billion in 2023, and $22.2 billion in 2022, according to the U.S. Bureau of Economic Analysis.² Notably, all goods—including clothing and footwear—have experienced a similar slowdown in spending, underscoring the nondiscriminatory impacts of the strained macroeconomic environment over the last three years. However, the administration change and tariff proposals have questioned future prices for goods in the sector, creating a pull-forward in demand. This has been reflected by PCE in the Clothing & Footwear category rising by $4.2 billion YOY in Q1 2025, almost doubling the growth seen in the prior year period ($2.3 billion YOY in Q1 2024). Positive sales momentum is expected to be transitory as consumers cannibalize future demand for pre-tariff purchases. Financial performance has bifurcated as a result of persistent macroeconomic and discretionary spending headwinds, with best-in-class operators maintaining market share and growing sales while others struggle to capture wallet share. Trade deal resolutions are expected to be the key catalyst to drive consumer confidence and uncork widespread spending. Any clarity around tariff rates will allow companies in the sector to confidently mobilize and adjust operations, ending a limbo period that has drastically impacted financial markets in the U.S.

Apparel and Footwear Market Participants Undergo Operational Changes Amid Widespread Tariffs; Middle Market Operators Stand to Benefit from De Minimus Elimination

The Trump administration’s sweeping tariff announcement on April 2^nd has injected considerable uncertainty and potential performance headwinds in the Apparel, Footwear & Accessories sector despite the policy’s subsequent 90-day rollback—which has provided negotiation time between trade partners. The proposed tariffs have hit sector source countries significantly with China as a major target for high duties. As a result, sector participants have focused internally on initiatives to address possible margin headwinds, ensure proper positioning under the new trade regime, and aim to achieve healthy financial performances through year end. Tariff mitigation levers have been the focus of many business owners through YTD. Sourcing diversification has been ongoing since the round of tariffs under President Trump’s first term beginning in 2018. Under his second term and the new round of tariffs, these efforts have accelerated as business owners have increasingly redirected production from China and Vietnam into Cambodia, Indonesia, India, Latin America, and near-shore hubs, while also leveraging dual-country component assembly as a work around. Supplier cost sharing has also served as a meaningful implementation—negotiating raw-material pricing and sharing duty clauses. Business owners have stocked inventory to front-run U.S. orders pre-duty. Selective price hikes, simplified stock keeping units (SKUs), colorway reductions, and marketing and corporate overhead cost cuts have also headlined tariff mitigation strategies in the sector. Some operators have elected to tighten promotional activity, rather than take price deliberately. The speed at which companies implement these mitigation levers will likely serve as a temporary competitive moat and dictate winners in the near term.

Footwear companies face significant challenges with a substantial portion of production coming from Asia and other markets impacted by tariffs. Asset-light apparel houses have held material tariff exposure as well, relying on contract negotiations to circumvent cost inflation and protect margins. Vertically integrated sector participants possess a modicum of insulation with the flexibility of moving capacity to other owned facilities in alternate countries. Luxury brands, however, stand to do well in the current environment. Many of these fashion houses have European operations that, if moved, would damage brand equity and thus refuse to undergo substantial production reorganization. Higher-end players, such as Hermès (ENXTPA:RMS), are expected to pass through cost inflation to its high-income consumers who have displayed more inelastic demand in economic downturns compared to low- or middle-income consumers. Affordable luxury brands, however, risk volume attrition if they overshoot price hikes. Despite these challenges in nearly every corner of the Apparel and Footwear market, the repeal of the de minimis loophole has been a silver lining for many sector participants and will likely act as a demand tailwind as the regulatory dust settles in the remainder of 2025 and into 2026.

The U.S. eliminated de minimis eligibility for China and Hong Kong products on May 2^nd, an exemption that allows imports into the U.S. of less than $800 in merchandise value to enter the country without any added duties. This exemption supported fast fashion and other e-commerce companies, such as Chinese low-cost retailers Shein and Temu, to undercut other industry participants with excessively low prices. While not solely attributable to Shein and Temu, de minimis imports into the U.S. jumped 98.4% in 2024 compared to 2022, according to the U.S. Customs and Border Protection.³ These companies’ proliferation created a “race to the bottom,” in which value-oriented or mid-priced operators had been forced to continue cutting costs and lowering prices to compete or risk significant margin erosion and sales volume declines. Middle market participants will likely see a return of pricing power following the repeal of this exemption and capture elevated sales volumes, acquirer interest, and valuations.

M&A Activity Subdued as High-Quality Businesses Garner Majority of Buyer Interest

M&A activity in the Apparel and Footwear market has declined 14.3% YOY to 78 transactions announced or completed YTD, primarily attributable to worsening deal making conditions in Q2 2025. Deal volume in Q1 2025 outpaced Q1 2024, rising 5.7% YOY. However, that positive momentum has deteriorated with transaction activity falling 26.8% YOY in Q2, largely due to liberation day tariff announcements and the uncertain outlook for discretionary spending in the U.S. Strategics have continued to comprise the majority (65.4%) of sector deal volume, recording 51 transactions YTD. Both private and public buyers have paused M&A pursuits amid the significant macroeconomic instability and its outsized impact on the sector’s supply chain. Private strategics have recorded 45 transactions to date—a decline of 18.2% YOY—while public strategic deal volume has dropped 64.7% YOY to six acquisitions. Private equity (PE) buyers have maintained a presence in 2025 when compared to 2024, which saw momentum build following two years of subdued sponsor dealmaking in the sector. PE buyers have announced or completed 14 platforms and 13 add-ons in YTD 2025—together a 42.1% increase YOY. Platforms and add-ons have both increased by four deals YOY. Sponsors have continued to express interest in the Apparel and Footwear market, but tariff risk has spooked the debt markets these buyers have relied on for acquisition financing, thwarting a larger comeback in PE dealmaking in the sector. Lenders have prioritized high quality credits in sectors less exposed to such external risks.

Capstone expects M&A activity in the Apparel and Footwear market to return in Q4 2025 after sector participants settle into reorganized operations and renewed go-to-market strategies. Clarity and visibility into tariffs are anticipated to catalyze additional M&A. Inked trade deals will be imperative to reassure acquirers and targets of the future operating environment. Specifically, a China-U.S. trade deal will likely act as a significantly positive tailwind for M&A activity in the Apparel, Footwear & Accessories sector due to the heavy reliance on the country’s manufacturing. The more favorable backdrop for mid-sized apparel, footwear, and accessories companies—due to de minimis repeal—may improve M&A pricing for this cohort. Financial sponsor involvement the remainder of the year will likely rely on lenders becoming less cautious of the sector and debt markets reopening for apparel and footwear businesses. Despite this confluence of factors impacting the M&A outlook, deal activity is expected to continue with buyers prioritizing companies with scale, strong brand equity, high-end customer demographics, limited fashion risk, and evergreen products.

Select Large-Scale, Blue-Chip Deals Headline M&A Activity in the Apparel and Footwear Market

Buyers have continued to pursue deals, focusing on high quality companies with supply chain and sales channel diversification, as well as proven resiliency in market downturns. The middle market (enterprise value less than $500 million) has continued to see deals transact but large-scale, blue-chip deals have captured headlines in the sector through YTD. Capstone anticipates deal activity will accelerate as acquirer and lender appetite for risk returns, and the ability to forecast future costs, earnings, and exits improves. Key sector transactions are detailed below.

• Authentic Brands Group to Acquire Dockers from Levi Strauss & Co. (May 2025, $280.3 Million) – In May 2025, brand management company, Authentic Brands announced its acquisition of Dockers’ intellectual property (IP) from Levi Strauss & Co. (NYSE:LEVI) for an enterprise value of $280.3 million. Levi Strauss’ divestment comes as the company refocuses direct-to-consumer (DTC) channels, its push into women’s and denim lifestyle, and scaling its Beyond Yoga brand. The acquisition of Dockers supports Authentic Brands’ portfolio strategy focused on brands with robust heritage, loyal consumers, and global reach. “[Dockers is] a brand with deep roots, high awareness, and a solid foundation in licensing — all things we look for when acquiring new brands. Dockers played a key role in shaping casual workwear as we know it today, and we see significant potential to build on that legacy and grow the brand across a variety of categories,” remarked Jamie Salter, CEO of Authentic Brands, in a press release.⁴
• DICK’S Sporting Goods to Acquire Foot Locker (May 2025, $4.9 Billion) – National athletic gear and apparel retailer, DICK’S Sporting Goods (NYSE:DKS) announced its acquisition of athletic footwear company, Foot Locker (NYSE:FL) for an enterprise value of $4.9 billion, equivalent to 0.6x EV/Revenue and 3.8x EV/EBITDA (May 2025). The transaction marks a key strategic milestone for DICK’S offering long term value creation through expanded global outreach within sports retail and a larger consumer base through product differentiation. The acquirer noted it has just 30% of its stores in malls and does not have access to many of the urban markets Foot Locker operates in, highlighting the potential market share appreciation available from the transaction, according to DICK’S Q1 2025 earnings call.⁵ Additionally, DICK’S anticipates the deal to create between $100 to $125 million in cost synergies, according to a press release.⁶ “Sports and sports culture continue to be incredibly powerful, and with this acquisition, we’ll create a new global platform that serves those ever evolving needs through iconic concepts consumers know and love, enhanced store designs and omnichannel experiences, as well as a product mix that appeals to our different customer bases,” noted Lauren Hobart, President and CEO of DICK’S, according to the press release.
• 3G Capital to Acquire Skechers U.S.A. (May 2025, $11.4 Billion) – Global investment firm, 3G Capital announced its acquisition of major Footwear industry player, Skechers (NYSE:SKX), for an enterprise value of $11.4 billion, equivalent to 1.2x EV/Revenue and 7.5x EV/EBITDA (May 2025). The take-private deal did not undergo a formal sale process as Skecher’s CEO Robert Greenberg holds an existing relationship with 3G Capital. The company imports a substantial amount of its products from China, Vietnam, and other Asian countries, a growing concern for public equity investors following the new administration’s tariff policies. 3G Capital was drawn to the deal due to Skechers’ strong record of growth and the opportunity to leverage its operational expertise to drive sustained long-term performance, particularly as the strained trade relationship between the U.S. and China presents significant margin uncertainty. Under the terms of the deal, 3G Capital will pay a 30% premium per share for all outstanding shares of Skechers, according to a press release.⁷ 3G Capital is expected to have an 80% stake in the soon-privately held Skechers, while shareholders may elect for $63 per share in cash or $57 per share in cash and one unit in the newly formed private company.
• Galaxy Universal Acquires Reebok Design Group and U.S. Operations of Reebok (January 2025, Undisclosed) – In January 2025, Galaxy Universal, a brand management company, acquired Authentic Brands-owned Reebok Design Group and the U.S. operations of Reebok for an undisclosed sum. The acquired U.S. operations include Reebok’s footwear wholesale, retail, and e-commerce channels. Under the terms of the deal, Galaxy Universal and brand licensing company, Batra Group, will form a joint venture to take over operations in Europe. Additionally, Galaxy Universal and Batra Group have formed joint ventures prior to Reebok for brands such as Hi-Tec and Magnum. Galaxy Universal manages a variety of brands—such as And1 and Tony Hawk—specializing in athletic wear, with Reebok furthering Galaxy Universal’s commitment to its core focus area. “[Galaxy Universal’s] expertise in athletic footwear and innovation, combined with Batra’s excellence in apparel ingenuity and relationship building, positions Reebok for incredible success across Europe and the U.K.,” noted Jarrod Weber, Global President of Sports and Lifestyle at Authentic Brands, according to a press release.⁸

Although sector participants have continued to grapple with pressured discretionary spending and geopolitical instability, the risk-averse environment is expected to give way to robust M&A and a return of risk appetite among acquirers. Loosening debt markets for Apparel and Footwear market companies and macroeconomic clarity—namely around the direction and pace of interest rate changes by the Federal Reserve and tariffs—will likely open the M&A market in the sector as these factors largely dictate both strategic and financial buyers’ perceived ability to confidently underwrite deals. Capstone anticipates an influx of deal activity through Q4 2025 and into 2026 as companies and fund managers digest recent economic and political volatility and these pressures subside.

To discuss how companies are mitigating tariff impacts and what acquirers value in the current environment, provide an update on your business, or learn about Capstone’s wide range of advisory services and Apparel and Footwear market knowledge, please contact us.

Andrew Woolston, Associate, was the lead Market Intelligence contributor to this article.

Julianna Zelnhefer, Summer Intern, also served as a Market Intelligence contributor to this article.

Endnotes

1. lululemon athletica, “Fourth Quarter and Full Year 2024 Financial Results Conference Call,” https://event.choruscall.com/mediaframe/webcast.html?webcastid=jMpMCqz6, accessed June 24, 2025.

2. Bureau of Economic Analysis, “Table 2.4.5. Personal Consumption Expenditures by Type of Product,” https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categories=survey&_gl=1*1kk0ghk*_ga*MjU1MDE5OTMxLjE3NTAyNjg4MTI.*_ga_J4698JNNFT*czE3NTA3NzMwNDUkbzMkZzEkdDE3NTA3NzMwNTIkajUzJGwwJGgw#eyJhcHBpZCI6MTksInN0ZXBzIjpbMSwyLDNdLCJkYXRhIjpbWyJjYXRlZ29yaWVzIiwiU3VydmV5Il0sWyJOSVBBX1RhYmxlX0xpc3QiLCI3MCJdXX0=, accessed June 24, 2025.

3. S. Customs and Border Protection, “E-Commerce,” https://www.cbp.gov/trade/basic-import-export/e-commerce, accessed June 24, 2025.

4. Authentic Group, “Authentic Enters Definitive Agreement to Acquire American Heritage Brand Dockers,” https://corporate.authentic.com/press-releases/authentic-brands-group-dockers-acquisition, accessed June 24, 2025.

5. DICK’s, “Q1 2025 Earnings Call Transcript,” https://s27.q4cdn.com/812551136/files/doc_financials/2025/q1/1Q25_Transcript_vF.pdf, accessed June 24, 2025.

6. DICK’s, “DICK’s Sporting Goods to Acquire Foot Locker to Create a Global Leader in the Sports Retail Industry,” https://investors.dicks.com/news/news-details/2025/DICKS-Sporting-Goods-to-Acquire-Foot-Locker-to-Create-a-Global-Leader-in-the-Sports-Retail-Industry/default.aspx, accessed June 24, 2025.

7. Skechers, “Skechers Agrees to be Acquired by 3G Capital,” https://investors.skechers.com/press-releases/detail/665/skechers-agrees-to-be-acquired-by-3g-capital, accessed June 24, 2025.

8. Authentic Group, “Authentic Partners with Galaxy Universal and Batra Group to Lead Reebok,” https://corporate.authentic.com/press-releases/authentic-galaxy-universal-and-batra-group-reebok, accessed June 24, 2025.