Luxury Retailers Crumble: SSENSE's Bankruptcy Filing Sparks Alarm Over Tariff Impacts

SSENSE, a prominent Canadian luxury fashion retailer, is preparing to file for bankruptcy protection, a decision taken in response to recent US tariff changes. The company cited the elimination of the de minimis exemption—which previously allowed duty-free shipping for packages valued under $800—as a significant factor in its financial challenges. This change was instigated by an executive order from former President Donald Trump, leaving many e-commerce businesses, including SSENSE, struggling to adapt.

In an internal email, CEO Rami Atallah expressed surprise at the exemption’s removal and noted that a combination of tighter liquidity and escalating trade pressures had precipitated an ‘immediate liquidity crisis.’ This crisis has arisen from lenders acting without the company’s consent to sell it, compelling SSENSE to seek creditor protection via the Companies’ Creditors Arrangement Act (CCAA). Atallah emphasized the firm’s intent to maintain business operations, including continued payment of salaries and employee benefits, during this turbulent period.

Founded in 2003 by the Atallah brothers, SSENSE has become a key player in the online fashion market, employing approximately 1,200 people globally and boasting a valuation of $4 billion in 2021 by Sequoia Capital. The company’s struggles underscore a wider trend affecting luxury retailers, wherein inflation and reduced consumer spending are negatively impacting sales.

Experts like Huma Aslam, a fashion technology consultant, and Charles de Brabant, the executive director of the Bensadoun School of Retail Management, highlighted that even solid and visible global brands face vulnerabilities due to changing tariffs. SSENSE’s predicament reflects a broader issue that many businesses are grappling with due to evolving trade policies, particularly those originating from the US.

The elimination of the de minimis exemption has had a ripple effect across industries. Other companies like Tapestry, the parent company of Coach, and Province of Canada have made similar announcements regarding the impact on their operations due to increased tariff burdens. Last year, an estimated 1.4 billion packages entered the US duty-free under this exemption, marking its importance in facilitating cross-border trade and commerce. The decision to revoke this longstanding policy not only complicates shipping for Canadian firms but raises concerns about the broader implications for North American trade relations.