Nike to cut China output for US market to ease tariff blow
BENGALURU: Nike said it would cut its reliance on production in China for the US market to mitigate the impact from US tariffs on imports, and forecast a smaller-than-expected drop in first-quarter revenue, sending its shares up 11% in extended trading.
US President Donald Trump's sweeping tariffs on imports from key trading partners could add around US$1 billion (RM4.2 billion) to Nike's costs, company executives said on a post-earnings call after the sportswear giant topped estimates for fourth-quarter results.
China, subject to the biggest tariff increases imposed by Trump, accounts for about 16% of the shoes Nike imports into the US, chief financial officer Matthew Friend said. But the company aims to cut the figure to a 'high single-digit percentage range' by the end of May 2026 as it reallocates China production to other countries.
'We will optimize our sourcing mix and allocate production differently across countries to mitigate the new cost headwind into the US,' he said on a call with investors.
Consumer goods is one of the most affected areas by the tariff dispute between the world's two largest economies, but Nike's executives said they were focused on cutting the financial pain. Nike will 'evaluate' corporate cost reductions to deal with the tariff impact, Friend said. The company has already announced price increases for some products in the US
'The tariff impact is significant. However, I expect others in the sportswear industry will also raise prices, so Nike may not lose much share in the US,' said David Swartz, analyst at Morningstar Research.
CEO Elliott Hill's strategy to focus product innovation and marketing around sports is beginning to show some fruit with the running category returning to growth in the fourth quarter after several quarters of weakness.
Having lost share in the fast-growing running market, Nike has invested heavily in running shoes such as Pegasus and Vomero, while scaling back production of sneakers such as the Air Force 1.
'Running has performed especially strongly for Nike,' said Citi analyst Monique Pollard, adding that new running shoes and sportswear products are expected to offset the declines in Nike's classic sneaker franchises at wholesale partner stores. Marketing spending was up 15% year-on-year in the quarter. On Thursday, Nike hosted an event in which its sponsored athlete Faith Kipyegon attempted to run a mile in under four minutes. Paced by other star athletes in the glitzy and live-streamed from a Paris stadium, Kipyegon fell short of the goal but set a new unofficial record. – Reuters
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Malaysian Reserve
29 minutes ago
- Malaysian Reserve
NYSE Content Advisory: Pre-Market update + U.S. & China agree to framework of deal
NEW YORK, June 27, 2025 /CNW/ — The New York Stock Exchange (NYSE) provides a daily pre-market update directly from the NYSE Trading Floor. Access today's NYSE Pre-market update for market insights before trading begins. J.D. Durkin delivers the pre-market update on June 27th Stocks are moving fractionally higher Friday morning, with the S&P 500 on pace to set a record after finishing just shy of the mark on Thursday. Overall, the major averages each ended Thursday's session higher. President Trump told reporters yesterday that the U.S. and China agreed to the framework of a trade deal. This development comes after initial talks in Geneva in May resulted in a postponement of escalating reciprocal tariffs. Later this morning, the University of Michigan will reveal its final June reading on consumer sentiment. A preliminary reading earlier in the month showed that sentiment had risen by 16% since May. Opening BellCOtwo Advisors celebrates the launch of CTWO, the first ETP providing physical exposure to the European Union Emissions Trading System Closing BellNew York Life Investments recognize IWLG & IWFG for delivering top quartile performance since inception Click here to download the NYSE TV App
BusinessToday
39 minutes ago
- BusinessToday
Ringgit Could Bounce Back Next Week
The Malaysian Ringgit experienced a volatile week, initially weakening to nearly 4.30 per US Dollar following US strikes on Iran over the weekend, before recovering much of its ground as geopolitical tensions eased. The currency is now expected to trade within a range of 4.22-4.26/USD in the week ahead, with market attention shifting firmly back to US macroeconomic indicators. While the Ringgit had been trading broadly stable in line with expectations, Monday saw markets unsettled by the geopolitical developments, pushing the currency close to the 4.30/USD mark. However, this initial risk-off sentiment dissipated swiftly. The US Dollar Index (DXY) traded on a softer footing this week, ranging between 97.7 and 98.4, even amidst the initial geopolitical stir. Notably, investors turned towards Euro-denominated assets rather than the greenback, as the spike in oil prices proved short-lived. Risk appetite recovered significantly after President Donald Trump announced a ceasefire between Iran and Israel, helping to reverse much of the Ringgit's earlier weakness. A subsequent pullback in both oil prices and the DXY further reinforced this recovery, driven by increasingly dovish signals from the Federal Reserve. Markets are now closely monitoring upcoming US economic data. The US core Personal Consumption Expenditures (PCE) reading, due tomorrow, is a key focus, with consensus expecting a 0.1% month-on-month increase. Attention will then shift to next week's crucial labor market data, where Non-Farm Payrolls (NFP) are anticipated to ease towards the 100.0k mark and the unemployment rate could potentially rise to 4.3%. June's manufacturing data will also be scrutinized for early signs of any tariff-related strain on the economy. With geopolitical risks largely unwound, the focus is squarely returning to US macro data. Softer employment figures could reinforce expectations of a Federal Reserve rate cut as early as September, aligning with analysts' base case. Fiscal developments in the US may also take center stage, particularly President Trump's proposed 'big, beautiful bill,' which is expected to get a Senate vote by July 4th. Technically, Kenanga Research said the USDMYR pair remains anchored around its 5-day Exponential Moving Average (EMA) at 4.24. Its direction in the coming week will largely hinge on incoming US macroeconomic data, with key support identified at 4.20 and resistance at 4.27. Related
The Star
an hour ago
- The Star
Dollar lingers near 3-1/2-year low as traders wager on US rate cuts
SINGAPORE: The dollar drifted on Friday, hovering near its lowest level in 3-1/2 years against the euro and sterling, as traders wagered on deeper U.S. rate cuts while awaiting trade deals ahead of a July deadline for President Donald Trump's tariffs. With the geopolitical tremors of Israel-Iran conflict in the rear view after a ceasefire that appeared to be holding, market focus this week has been on U.S. monetary policy. The prospect of Trump announcing the next Federal Reserve chair, who is expected to be more dovish, earlier than usual to undermine the current chair Jerome Powell has raised odds of the central bank cutting rates. Powell, whose term ends in May, was also interpreted as being more dovish this week in testimony to U.S. Congress, adding to expectation of more rate cuts. Traders are now pricing in 64 basis points of easing this year versus 46 bps expected on Friday. "The sooner a replacement is announced for Powell, the sooner he could be perceived to be a 'lame duck'," said Carol Kong, a currency strategist at Commonwealth Bank of Australia. The Wall Street Journal reported on Wednesday that Trump has toyed with the idea of selecting and announcing Powell's replacement by September or October, a move analysts say could lead to the person operating as a shadow Fed chair, undermining Powell's influence. Trump has not decided on a replacement for Powell and a decision is not imminent, a person familiar with the White House's deliberations told Reuters on Thursday. "Such an outcome could introduce some volatility into financial markets if the nominee makes public comments markedly different to the current chair," CBA's Kong said. "For now, expectations President Trump will choose a more dovish chair will keep downward pressure on FOMC pricing and the USD." Trump has repeatedly attacked Powell and called for rate cuts this year, stoking investor worries about the slow erosion of U.S. central bank's independence and credibility. The euro was steady at $1.1693 in early trading after hitting $1.1745 in the previous session, its highest since September 2021. Sterling last fetched $1.3733, just below the October 2021 top of $1.37701 touched on Thursday. The dollar index, which measures the U.S. unit versus six other currencies, was lingering near its lowest since March 2022 at 97.378, on course for a 2% decline in June, its sixth straight month in the red. The index has dropped more than 10% this year as Trump's tariffs stoke U.S. growth worries, leading investors to look for alternatives. The yen was a bit weaker at 144.73 per dollar, while the Swiss franc was last at 0.8013 per dollar, perched near its strongest level in a decade. Investor attention will also be on progress on trade deals ahead of the July 9 deadline for Trump's "reciprocal" tariffs as nations scramble to get an agreement over the line with the clock ticking. German Chancellor Friedrich Merz said on Thursday the EU should do a "quick and simple" trade deal with the United States rather than a "slow and complicated" one. A White House official said on Thursday the U.S. has reached an agreement with China on how to expedite rare earths shipments to the United States. The dollar's weakness pushed the Australian dollar often considered a risk proxy, to a seven-month high of $0.6564 on Thursday. It last fetched $0.6559 in Asia mid-morning on Friday. The Aussie is set for a 1.6% gain for the week, its strongest week since early April. Emerging market currencies also got a lift from the beaten-down dollar, with the Taiwan dollar surging to its strongest level since April 2022. Traders in Taiwan said the local currency's rise was being driven by expectations of interest rate cuts in the United States, the general global weakness of the greenback and the continued flood of foreign capital into the island. "These trends can't be stopped - the direction coming from the Americans is very clear," said one Taiwan-based market participant. - Reuters
