California Apparel News

The Federal Reserve announced on March 19 that it would maintain its 4.25–4.5 percent borrowing rates, signaling caution as the first quarter of 2025 was coming to a close. These figures remain consistent with the Fed’s December 2024 rates when it cut a quarter percentage point. At that time, the United States’ central bank projected that it would make two additional cuts during 2025, but those remain to be seen after the March decision to hold steady.

Many leaders in the financial industry remain hopeful that those rate cuts will be made later in 2025 but also warn that fallout from Trump-administration tariffs and increased inflation might drive consumers to further tighten their budgets. California Apparel News asked financial leaders in the apparel business: What do the Federal Reserve’s unchanged interest rates signal for apparel businesses and do you see any relief in 2025?

Louis Barone

Senior Advisor

The Hedaya Capital Group

 While the March Federal Reserve meeting concluded with no change to interest rates, the Fed signaled two rate cuts were expected in 2025. In December, they had projected two quarter-point reductions for this year, which still remains a possibility. Will interest rates alone signal a further slowing trend for apparel businesses? Not singularly.

We should look at the slump in consumer confidence and apparel-buying trends as a combination of factors: the uncertainty of interest-rate cuts along with Trump’s new or increased tariffs and reversal of course on many of them as well as concerns about inflation and a weakening labor market. Consumers, affected by the recent period of high inflation, are increasingly price sensitive.

The apparel industry remains marked by uncertainty moving into 2025. With projected year-over-year fashion-industry sales growth between 2 and 4 percent, the sector aligns with the global GDP growth forecast of 2.9 percent. While it’s growth, it’s sluggish growth. Lululemon joined Nike in warning that slumping consumer confidence will hurt sales. Target and Walmart have reported customers pulling back.

The Fed cutting rates once or twice for the balance of 2025 at the anticipated quarter point won’t by itself be a signal for relief for apparel businesses. It can only be a component for longer-term growth in 2026 and beyond when coupled with tariffs and inflation.

    Darrin Beer

    Western Regional Manager

    CIT Commercial Services—a subsidiary of First Citizens Bank

 The Federal Reserve’s decision to keep interest rates unchanged signals a cautious approach amid economic uncertainty. While last year’s rate cuts of 1 percent provided some relief, borrowing costs continue to be elevated. Furthermore, inflationary pressures, especially as tariffs and trade policies are put into effect, impact the cost of goods. Some relief in borrowing costs may come later in 2025 as the consensus is for two anticipated rate cuts by year-end. Lower rates may help stimulate consumer spending, especially on discretionary purchases like apparel.

During this period of economic uncertainty, most of our clients are focused on inventory and expense management while paying close attention to gaining efficiencies in the supply chain. Some relief in borrowing costs is certainly welcome, but apparel companies must continue to focus on operational efficiencies as they navigate the current economic climate.

Mark Bienstock

Managing Director

Express Trade Capital

 Tariffs! The outcome of both the existing tariffs announced against China, Mexico and Canada along with the retaliatory tariffs will have a profound impact on the overall economy and apparel sector in particular.

The Fed has just guided for two potential quarter-point cuts; however, tariffs are inflationary, and this can put the Federal Reserve in a very difficult position regarding any further cuts. Apparel manufacturers face a very daunting task in potentially absorbing some of these costs while also trying to pass some of them on to the retailers. Only those companies that had the foresight to diversify their sourcing supply or have substantial factory relations while running a very lean operation are poised to deal with the upcoming pricing pressures that will be inevitable.

    Sydnee Breuer

    Executive Vice President and Western Regional Manager

    Rosenthal & Rosenthal

 Despite earlier forecasts of more interest-rate reductions for 2024 and into 2025, the Federal Reserve did not change interest rates at its recent meeting. Recent indicators reflect a stable unemployment rate and inflation a bit above the Fed’s target rate. Overall, the economy has expanded at a solid pace.

However, the “recent” economic data are not recent enough considering the pace of changes we are seeing. They do not take into account (or at least not fully) the recent imposition of tariffs, the threatened imposition of more tariffs and retaliatory tariffs. Additional economic uncertainty exists with the DOGE’s [Department of Government Efficiency] efforts at reducing or eliminating certain fundings and the federal-government-worker reduction. This economic uncertainty can weaken demand across the board.

Tariffs lead to higher prices, which in turn lead to inflation. The Federal Reserve has a target inflation rate of 2 percent, but the tariffs will push inflation higher so I do not expect to see any relief for the apparel industry—or other industries for that matter—as to interest rates in the foreseeable future.

Tae K. Chung

Senior Vice President, Business Development

Republic Business Credit

 The Fed’s decision to keep interest rates steady suggests its aim to control inflation without stifling economic growth. Consumers may continue spending on apparel; however, spending on nonessential goods could decrease. High or unchanged interest rates may limit consumers’ disposable incomes, especially as mortgage rates, car loans and other essential payments continue to rise. In the apparel sector, cautious consumer spending could slow growth or increase demand for value-driven and discounted products.

Within the industry, higher interest rates may increase borrowing costs for apparel businesses, affecting their ability to finance inventory or expansion efforts. Suppliers, manufacturers and logistics companies may also face higher financing costs that could trickle down to apparel companies, leading to higher prices for consumers and tighter margins for businesses. This can make it difficult to maintain profitability unless apparel businesses can absorb or pass on these interest-driven costs.

Economic recovery or improved consumer sentiment could also boost the industry. When consumers feel secure about their financial futures, they spend more freely, potentially benefiting apparel manufacturers. If pent-up demand from previous years due to economic uncertainty leads to a surge in purchases, the fashion industry may also experience a significant bounce back.

In summary, while the Fed’s decision to keep rates steady may pose challenges for the apparel industry in the short term, a potential economic recovery or improved consumer confidence could offer relief as we look ahead.

    Gino Clark

    Senior Vice President

    Milberg Factors

 Uncertainty is a recurring theme, but this is nothing new for the apparel industry. Over the last 30 years I’ve come to appreciate the resilience of the industry and its ability to adapt and overcome seemingly endless obstacles. The Fed’s wait-and-see decision to hold interest rates steady was explained by relative strength in employment and price stability.

During the last meeting, the Fed reconfirmed its plans to decrease the federal-funds rate two times by the end of 2025. They also discussed several variables that may negatively impact the economy, including possible tariff increases. This pending economic uncertainty does signal a cautious tone, especially in the apparel industry, because it relies heavily on imports and consumers’ discretionary spending. For example, one successful apparel importer monitors weekly retail-sales performance style by style and limits inventory positions to the best-performing styles.

Any apparel company that understands its core strengths, monitors its performance closely and maintains a strong capital structure will be able to overcome any uncertainty and take advantage of opportunities as they arise. At Milberg, we understand our strength isn’t just to provide funding—we offer peace of mind. Our financial strength, deep business understanding and entrepreneurial mindset allow us to deliver the flexibility and resources needed to succeed—no matter what the market brings.

Martin F. Efron

Executive Vice President,

Head of Factoring

White Oak Commercial Finance, LLC

 The Federal Reserve’s decision to keep interest rates unchanged is a reflection of two opposing economic signals. On the one hand, the Fed is seeing signs of a slowing economy, which historically would prompt a rate cut to stimulate growth. On the other hand, inflation remains above the levels the Fed would like, and recent tariff implementations are likely to prevent inflation from easing in the near future, a situation that would normally lead to higher rates.

For apparel businesses, this decision doesn’t bode well. A slowing economy combined with persistent inflation typically results in reduced consumer spending power leading to a weaker sales environment. While some companies may still thrive due to market differentiation or operational efficiencies, the broader industry is likely to face significant challenges in the short and medium term. I don’t expect significant changes in interest rates for the remainder of 2025.

Having said all this, in these very uncertain times, the outcomes are also not as certain as they used to be. Apparel businesses should focus on what they can control: remaining nimble and adjusting to both the economic challenges and the evolving consumer landscape.

    Eric Fisch

    Senior Vice President and National Sector Head, Retail and Apparel

    HSBC Bank USA N.A.

 We’ve seen numerous large retailers scale back forecasted revenue growth for the coming year, fearing reductions in consumer confidence will lead to less spending. Nearly every brand I speak to has positioned the year conservatively and reduced production to better manage risk. In any time of uncertainty, liquidity is king, and too much product can lead to losses and brand damage through discounting. Scenarios like this can become self-fulfilling prophecies. If a brand significantly reduces inventory, cuts marketing spend and curtails any store expansion, it is guaranteeing a lackluster year. It also risks getting eclipsed by other competitors who chose to continue spending on growth. Some of the most iconic brands today were able to grow through periods of recession as others took a conservative approach.

Companies can balance these two approaches through resourcefulness and creativity. Instead of traditional social-media spend, we are seeing more companies looking to promote organic customer content through their own channels. Rather than take risks on large inventory positions, more brands are trying limited-release styles and colors that cycle quickly and create newness with less investment. Opening new doors requires large upfront investment so we are seeing more interest in owned concessions inside department stores, which involve a fraction of the capital expenditure. Ultimately, risk yields reward, but this year prudence and adaptability may be the favored route for most companies.

Rosario Jáuregui

Senior Vice President, New Business

Merchant Financial Group

 The anticipation was that rates would continue to come down this year. We still believe that will be the case throughout 2025, but how quickly is still unpredictable.

However, the unchanged interest rates are not the sole issue manufacturers face in 2025. A big topic is the rising tariffs that are directly affecting the sourcing prices and production costs. Manufacturers are looking outside of China for production solutions as well as trying to lean on all their production and retail partners to participate in the additional costs. This has been challenging to say the least as many manufacturers have not fully secured this much-needed relief from their suppliers and vendors. A reduction in interest rates surely would have helped the savings for apparel companies, but that has not come as quickly as some have hoped.

Manufacturers are still facing significant pressures from consumers who continue to pull back from going to bricks-and-mortar stores. More than 50 percent of consumers are buying directly from Amazon, Temu and Shein, which ship directly to consumers. The added pressure of requests for extended selling terms from traditional retailers will also cost manufacturers as their working-capital loans are not collecting and paying down as quickly as they would like with the interest rates at the current level.

Manufacturers can avoid or minimize turbulence down the line by managing expenses, increasing digital abilities, shaping a defined brand identity and continuing to adapt to consumer trends to capture a new growth opportunity.

    Richard H. Kwon

    Executive Vice President,

    Portfolio Manager

    Finance One, Inc.

 The Federal Reserve’s decision to hold interest rates steady, with modest cuts planned for later in 2025, offers little relief for small-business apparel companies. High borrowing costs combined with inflation and tariffs are curbing consumer spending, and margin compression is more pronounced for companies in the budget-apparel category. To thrive, these companies must pivot toward innovation and differentiation, leveraging unique offerings to move beyond the budget segment and capture more-profitable markets.

Incorporating smart fabrics and wearable tech is one way to transform products into experiences that command a premium. Brands like Levi’s and Ralph Lauren have successfully integrated technology into their clothing lines, offering features like gesture controls and fitness tracking. Even adding a single smart feature can elevate apparel brands, appealing to tech-savvy consumers willing to pay more for enhanced functionality.

Consumers are also embracing brands with environmental sustainability in mind, favoring eco-friendly options such as bamboo fabrics, mycelium leather and recycled plastics. Brands like Adidas have seen success with sustainable lines, turning ocean waste into stylish gear. By adopting eco-friendly materials and practices, companies not only attract environmentally conscious buyers but also enhance their brand story and image.

To succeed in this market, apparel companies should invest in innovation and differentiation. Sourcing eco-friendly materials, collaborating with tech startups and adopting sustainable production methods like zero-waste cutting are a few examples. By embracing these strategies they can turn economic challenges into opportunities for growth and resilience.

Marco Vinicio Valverde

Partner, Apparel National Practice Leader

Moss Adams

 The implications of unchanged interest rates are in consumer spending, cost of borrowing and investment decisions. Stable interest rates typically support consumer confidence and spending. If borrowing costs remain low, consumers may feel more comfortable purchasing discretionary items like apparel.

For apparel businesses, unchanged rates mean that financing for inventory purchases, expansion or operational improvements remains affordable. This can be crucial for businesses looking to invest in growth or navigate supply-chain challenges. A stable interest-rate environment can encourage apparel businesses to pursue investments in technology, sustainability initiatives or supply-chain enhancements without the pressure of rising borrowing costs.

Overall, the biggest uncertainty and challenge currently facing the industry is the uncertainty on tariffs and their impact. Tariffs on imported goods can increase costs for apparel businesses that rely on overseas manufacturing. If tariffs remain uncertain or high, companies may face squeezed margins, which could lead to higher prices for consumers and, eventually, lower demand for their product if prices rise significantly. Companies might be forced to rethink their supply chains, potentially leading to diversification of suppliers or shifts to domestic production, which can be more expensive.

In summary, while the Federal Reserve’s unchanged interest rates may provide a stable environment for apparel businesses, the ongoing uncertainty regarding tariffs poses challenges. The outlook for relief in 2025 will depend on economic conditions, tariff resolutions and the ability of businesses to adapt to changing market dynamics. Monitoring these factors will be essential for making informed strategic decisions.

    Kenneth L. Wengrod

    Managing Member

    Stealth Management Group, LLC

 The Federal Reserve’s decision to hold interest rates steady isn’t just a macro signal—it’s a reality check for our industry. Borrowing remains costly, and the consumer is still cautious. But if you’re in apparel and waiting on the Fed to cut rates before you act, you’re in the wrong business. Interest rates are out of our control. What is in our control? Supply-chain speed, inventory discipline and margin protection.

Every single day in your supply chain has a dollar value. Time is more than money—it’s risk exposure, cash flow, markdowns, avoidance and customer relevance. The most disciplined operators are treating time like currency: nearshoring, tightening logistics, forecasting with precision and moving inventory to optimal minimums—not just to survive but to win.

Will there be rate relief in 2025? Possibly. But the best-run brands won’t need it. They’ve already done the hard work—rationalizing SKUs, investing in agility and focusing on the customer, not the central bank.

This industry has always been about speed, creativity and execution under pressure. That hasn’t changed. The Fed won’t make you profitable—you will. Control what you can. Move faster. Run leaner. Lead smarter. That’s how the next generation of apparel leaders will rise—regardless of what the Fed does next.

Michael Wildeveld

Director of Veld Mergers and Acquisitions

The Veld Group

 The American apparel industry has clearly shouldered the burden of increased regulation, skyrocketing real-estate expenses and continued minimum-wage increases, so it’s no wonder that so many firms have offshored their manufacturing components to lower-cost operators outside the U.S. The Federal Reserve’s unchanged interest rate may be impactful in many CapEx-intensive industries, but since apparel is no stranger to challenges, the lack of rate changes is not as consequential as several other factors.

The threat of import tariffs, on the other hand, is highly advantageous to the industry in the long run. Since I reside on the sell side of the mergers-and-acquisitions space, I have been delighted to have already encountered foreign firms that have expressed an interest in acquiring domestic producers or their facilities in the past month.

This interest in American manufacturing has already occurred more than I’ve likely seen in the entire past decade.

Editor’s note: Responses were made prior to the Trump administration’s implementation of “Liberation Day” tariffs on April 2 and their subsequent pause on April 9. 

Responses have been condensed for clarity and space.