Declining Profits Amid Tariff Impact and Weak U.S. Consumer Demand
Continued Sales Growth Driven by Expansion in Activewear
Guatemala's 10% Tariff Becomes a Key Strategy for the U.S. Market
Hansae Co., Ltd., a fashion ODM (Original Design Manufacturer), announced its strategy to overcome the challenges posed by U.S. tariffs by expanding its vertical integration in Central America and increasing the proportion of high-value products such as activewear.
On October 29, Hansae Yes24 Group held the '2025 Global Investor Relations (IR) Conference' in Ho Chi Minh City, Vietnam, where it presented the group's mid- to long-term growth strategies and the key business status of each affiliate. Kim Ikhwan, Vice Chairman of Hansae Co., Ltd., was the first among the affiliates to speak at the event. He stated, "Although profitability has declined due to the U.S. economic downturn and continued global supply chain investments, we expect this year's sales to reach 1.9 trillion won, driven by an increase in orders for high-value product lines in the second half of the year."
Hansae Co., Ltd. did not disclose its operating profit forecast on this day. However, in the first half of the year, sales and operating profit were 942.3 billion won and 32.6 billion won, respectively. Compared to last year's sales (859.7 billion won) and operating profit (80.6 billion won), sales increased, but operating profit plummeted by about 60%. Given that the U.S. economic trend remains largely unchanged and supply chain investments continue, the company anticipates continued weak profits in the second half of the year.
The sharp decline in Hansae Co., Ltd.'s profits is attributed to two main factors: a decrease in apparel consumption caused by the U.S. economic downturn and the burden of tariffs. Hansae Co., Ltd. is an ODM and OEM apparel company with more than 30 clients, including Gap, Target, Walmart, and Carhartt. Sales to the U.S. account for approximately 90% of its total revenue.
Hansae Co., Ltd. has seen a significant drop in orders from mass-market retail clients in the U.S. Target, a retail chain frequented by customers with higher average household incomes than Walmart, has been particularly affected as apparel spending among middle-class consumers has declined. As a result, the company's sales from the mass-market segment have fallen from the high 20% range to the low 20% range. Vice Chairman Kim Ikhwan said, "While performance at Walmart has been strong, Target has seen a significant decline this year. However, we are preparing new brands within Target, so we expect performance to improve next year."
Tariffs are also a factor weakening Hansae Co., Ltd.'s financial strength. Operating profit has been squeezed as clients have demanded that the company share the burden of tariffs.
Hansae Co., Ltd. plans to escape the threat of tariffs through vertical integration in Central America. This initiative enables the company to handle all processes from yarn and fabric production to sewing in the Michatoya region of Guatemala. By producing closer to the U.S., the company can ensure faster delivery times, and Guatemala's reciprocal tariffs are in the 10% range, which is lower than Vietnam's 20%, allowing Hansae Co., Ltd. to benefit from tariff advantages.
Vice Chairman Kim stated, "We will complete vertical integration in Central America by launching our Guatemala plant in the third quarter of next year. As global buyers increasingly prefer ODM companies that provide one-stop services from design to logistics, vertical integration in Central America will become a core strategy."
Additionally, Hansae Co., Ltd. aims to boost profits by increasing the share of high-value activewear. Previously, the company laid the foundation for entering the synthetic fiber sector by acquiring the U.S. textile manufacturer Texollini last year. Hansae Co., Ltd. is developing a strategy to collaborate not only with major brands such as Lululemon but also with emerging activewear brands that are in the early stages of growth.
Vice Chairman Kim explained, "Our collaboration with Dick's Sporting Goods, which began at the early stage of their business, has produced strong results. While I cannot disclose specific figures, orders for items from activewear brands such as Lululemon are increasing, and we expect sales to rise significantly next year."
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