Portrait Weekly Framing: Tariffs & Inventory Builds
Are company's building inventory ahead of tariffs, and what's the impact on marine transport?
With earnings season in full swing, we’ve been scouring earnings reports and transcripts for clues as to the state of the economy. While companies like Apple, Google, and Amazon have all offered their views on the momentum of their businesses and market environments, I found a comment from Microsoft particularly interesting:
“Windows OEM and devices revenue increased 4% year-over-year ahead of expectations, driven by commercial inventory builds in advance of Windows 10 end of support as well as uncertainty around tariffs.”
From my own investing experience, I’ve witnessed how powerful inventory swings can be, so I thought to investigate this theme further. Specifically, I leveraged Portrait to query different industries, looking at whether companies are seeing inventory builds in anticipation of tariffs.
After scanning over several industries, I found company commentary from the Leisure Products industry to be most interesting. Specifically, several companies in this space mentioned accelerating inventory stocking in anticipation of tariffs. Further, these companies typically targeted “evergreen products,” or products where demand is stable over the long-term.
Overall Takeaways
Limited Evidence of Broad Inventory Builds: Despite widespread discussion of tariff risks, only a small number of companies are explicitly building inventory in anticipation of tariffs. Most companies are maintaining or reducing inventory levels while focusing on other mitigation strategies (Columbia Sportswear Company, Q4 2024 Earnings Call, Dover Corporation, Q4 2024 Earnings Call).
Manufacturing Location Advantage: Companies with significant domestic or proximity manufacturing capabilities appear less concerned about tariff impacts and are not building inventory buffers, with some viewing potential tariffs as a competitive advantage (Worthington Enterprises, Inc., Q2 2025 Earnings Call, Dover Corporation, Q4 2024 Earnings Call).
Supply Chain Diversification Priority: Rather than building inventory, most companies are focusing on long-term supply chain diversification strategies to reduce reliance on any single country, particularly China (Mattel, Inc., Q4 2024 Earnings Call, Funko, Inc., Q3 2024 Earnings Call).
Multiple Mitigation Strategies: Companies are employing various strategies beyond inventory builds, including supplier diversification, pricing adjustments, and manufacturing footprint optimization (Five Below, Inc., Q3 2025 Earnings Call, Brunswick Corporation, Q4 2024 Earnings Call).
Selective Strategic Building: The few companies that are building inventory are doing so selectively and strategically, often focusing on core or evergreen products, rather than implementing broad-based inventory builds (Build-A-Bear Workshop, Inc., Q3 2025 Earnings Call, Academy Sports and Outdoors, Inc., Q3 2025 Earnings Call).
Academy Sports & Outdoors
Strategic Receipt Acceleration: Management has deliberately accelerated some spring 2025 receipts to arrive before Chinese New Year, serving the dual purpose of potentially avoiding increased tariffs while also mitigating risks from a potential East Coast port strike (Academy Sports and Outdoors, Inc., Q3 2025 Earnings Call).
Build-A-Bear Workshop
Explicit Tariff-Related Inventory Build: The company has increased inventory by $6.4 million year-over-year to $70.8 million, with management confirming that the "vast majority" of this increase was specifically related to accelerating inventory receipts due to potential tariff impacts (Build-A-Bear Workshop, Inc., Q3 2025 Earnings Call).
Brunswick Corporation
Strategic Inventory Staging: Management has implemented proactive inventory staging measures specifically in response to tariff uncertainty, while simultaneously maintaining disciplined overall inventory control with planned reductions (Brunswick Corporation, Q4 2024 Earnings Call).
Columbia Sportswear
Inventory Reduction Despite Risks: The company reported a 7% year-over-year reduction in inventories exiting 2024, with management characterizing inventory levels as "healthy" despite potential tariff concerns (Columbia Sportswear Company, Q4 2024 Earnings Call).
Dover Corporation
Proximity Manufacturing Advantage: Management explicitly stated they do not see any inventory builds or unusual behavior related to potential tariffs, attributing this to their proximity manufacturing model where production occurs close to end markets (Dover Corporation, Q4 2024 Earnings Call).
Five Below
Proactive Planning Without Building: While maintaining significant China exposure at 60% of sourcing, the company is focusing on vendor collaboration and sourcing diversification rather than inventory builds, drawing on their successful navigation of 2018-2019 tariffs (Five Below, Inc., Q3 2025 Earnings Call).
Funko
Limited Direct Exposure: Only approximately one-third of products are manufactured in China, with less than 10% being Loungefly products already subject to tariffs, positioning the company with relatively lower tariff exposure (Funko, Inc., Q3 2024 Earnings Call).
Mattel
Industry-Leading Diversification: The company maintains significantly lower China exposure at 50% versus industry average of 80-85%, with plans to reduce further to ensure no single country represents more than 25% of production by 2027 (Mattel, Inc., Q4 2024 Earnings Call).
NIKE
Inventory Management Focus: Rather than building inventory for tariff protection, management is focused on accelerating inventory actions to drive a return to a healthy marketplace, with specific emphasis on reducing aged inventory (NIKE, Inc., Q2 2025 Earnings Call).
Worthington Enterprises
Domestic Manufacturing Position: Management indicates they could be a net beneficiary of future trade actions due to their significant domestic manufacturing presence, having spent considerable time preparing for various trade policy scenarios (Worthington Enterprises, Inc., Q2 2025 Earnings Call).
From the highlights, we see that there seems to be a divergence between companies, with some companies reporting inventory builds, while others companies actually highlighted declines in inventory. Interestingly, when flipping through company-specific analyses, I uncovered a new theme: shipping constraints.
Funko Inc.
Near-Term Logistics Risk: Management expressed concern about potential Q4 2024 and Q1 2025 logistics capacity constraints if new tariffs are enacted, as companies may rush to import higher-priced items ahead of implementation. While 70% of Funko's freight rates are under contract, shipping capacity availability remains a risk. Management indicated they are developing specific contingency plans to address potential shipping capacity constraints.
I consequently grew curious: are shipping companies now seeing temporarily elevated demand? To answer this question, I then dove into the marine transportation industry, using Portrait to find insights from companies on tariffs and demand.
Analysis of Inventory Builds in Anticipation of Tariffs
Current State of Inventory Building Activity
Companies are showing divergent approaches to inventory management in anticipation of potential tariffs, with some actively building inventory while others maintain a wait-and-see approach. Expeditors International confirms that companies are actively trying to “frontload" imports into the United States ahead of January 20, 2025, specifically to avoid potential new tariffs under the incoming administration (Expeditors Special Call). This is supported by Radiant Logistics’ observation of customers “pulling forward" inventory, though they note some uncertainty about how much is “posturing versus something that's really going to be put into motion” (Radiant Logistics Q1 2025).
However, several major manufacturers are taking a more measured approach. Polaris, for example, is focusing on structural solutions rather than tactical inventory builds, emphasizing "things we can control" rather than speculating on policy changes (Polaris Q4 2024). Similarly, MarineMax shows no indication of preemptive inventory builds, with their elevated inventory levels attributed to lower-than-expected sales rather than strategic purchasing decisions around tariffs (MarineMax Q1 2025).
Drivers of Inventory Building Decisions
Several potential tariff actions are driving company decisions regarding inventory builds:
Potential duties of up to 60% on imports from China
Possible 10% duty on Chinese goods specifically related to the fentanyl crisis
Potential 20% duties on imports from the rest of the world
Threatened tariffs of up to 25% on Canada and Mexico unless there is increased cooperation on border issues (Expeditors Special Call)
The timing of implementation is a critical factor, with companies expecting potential changes as early as “day 1” of the new administration, with limited advance notice or comment periods (Expeditors Special Call). This rapid implementation potential is driving some companies to take preemptive action, while others are waiting for more clarity.
Impact on Transportation and Storage Markets
The inventory pull-forward activity is already affecting transportation and storage markets:
Ocean freight prices remain “relatively robust” partly due to “people trying to get ahead of potential tariffs” (Radiant Logistics Q1 2025).
Warehousing capacity is expected to become constrained again due to inventory pull-forward activity, with Radiant Logistics noting “if people are pulling forward, they got to find some place to put all their stuff” (Radiant Logistics Q1 2025).
Companies are seeing tightening of capacity on the West Coast, influenced by increased ocean import activity (Radiant Logistics Q1 2025).
Alternative Strategies Being Pursued
Companies are pursuing various strategies beyond direct inventory builds to manage potential tariff exposure:
1. Supply Chain Diversification:
Manufacturing shifts from China to South Asia, with China's high-tech share decreasing from 32.5% to 23.3% between 2019 and 2024 (Expeditors Special Call).
Vietnam’s share increasing from 27% to 34.5% (Expeditors Special Call).
Companies pursuing “China plus one” sourcing strategies (Expeditors Special Call).
2. Structural Solutions:
Utilizing Foreign Trade Zones (FTZs) to admit goods using privileged foreign status.
Implementing first sale valuation programs.
Considering drawback programs for goods ultimately destined for other North American markets (Expeditors Special Call).
Industry-Specific Approaches
Different industries are showing varying approaches to tariff-related inventory management:
Manufacturing Sector:
Brunswick Corporation is explicitly using "inventory staging" as part of their tariff mitigation strategy while simultaneously working to reduce overall exposure through supply chain diversification (Brunswick Q4 2024).
Polaris has reduced China sourcing by approximately $200 million historically and is executing "aggressive" sourcing reductions planned for 2025 (Polaris Q4 2024).
Transportation/Logistics Sector:
RXO anticipates a "short-term tailwind" from inventory pull-forwards, followed by a potential "headwind" as volumes slow after the initial effect dissipates (RXO Q4 2024).
UPS is positioning itself for trade pattern shifts by expanding operations in strategic locations like Hong Kong and the Philippines (UPS Q4 2024).
Expected Duration of Impact
Companies are considering different time horizons in their inventory strategies:
Near-Term (0-6 months):
Initial surge in demand as companies pull inventory forward (RXO Q4 2024).
Temporary boost in transportation volumes (Radiant Logistics Q1 2025).
Intermediate-Term (6-18 months):
Potential slowdown in volumes after initial pull-forward effect (RXO Q4 2024).
Expected warehousing constraints as companies manage elevated inventory levels (Radiant Logistics Q1 2025).
Long-Term (18+ months):
Structural shifts in supply chains and manufacturing locations (Expeditors Special Call).
Increased nearshoring and supply chain regionalization (RXO Q4 2024).
From the final snippet, we see that companies are indeed discussing frontloading, with a near-term impact that includes temporary boosts in transportation volumes and surges in demand due to inventory pull forwards.
Clearly, the simple threat of tariffs from the Trump Administration is causing reactionary moves from companies, rippling all the way through the supply chain. To pull further on this thread, or any topic of interest in public markets, Portrait is your ready deputy.
To learn more about supply chains, tariffs, or inventory, head over to Portrait!