Nike Takes Billion Dollar Tariff Hit But Predicts Hard Yards Behind It

Forbes

27-06-2025

Despite tariffs, Nike believes the worst is behind it.
Nike put a billion-dollar price tag on tariff costs Thursday, while it proclaimed that the worst should be behind the company as sales and profit declines moderate ahead.
The Portland-based footwear giant took its largest financial hit yet from its extensive turnaround plan during its fiscal fourth quarter as finance chief Matt Friend conceded to analysts on an earnings call that the tariff duties represented a 'new and meaningful' cost to the business.
'With the new tariff rates in place today, we estimate a gross incremental cost increase to Nike of approximately $1 billion' Friend said for its current fiscal year, though he stressed that the company is working to 'fully mitigate' these additional costs as it reorganizes its supply chain.
Currently, about 16% of Nike's manufacturing and footwear manufacture comes from China and Nike anticipates that it will be able to reduce this to the high single-digits by the end of next summer, although Friend reiterated that China remained important to its global source base, as he also pledged to future investment in the business.
Nike Beats The Street
Nike beat Street consenus estimates with quarterly sales to May 31 of $11.1 billion versus analyst expectations of $10.72 billion, but that was down about 12% from $12.61 billion a year earlier. The company also reported net income for the quarter was $211 million, compared with $1.5 billion a year prior.
Nike had predicted that its fiscal fourth quarter would be the low point of its turnaround but conditions have toughened since, though Friend confirmed in Nike's earning release that headwinds are expected to moderate moving forward.
Nike's stock price held firm after the announcement, but its stock value is off around 15% in the year to date and are a third down over 12 months.
'The results we're reporting in Q4 and in FY25 are not up to the Nike standard, but as we said 90 days ago, the work we're doing to reposition the business through our 'Win Now' actions is having an impact,' Nike CEO Elliott Hill said. 'From here, we expect our business results to improve.'
Nike will focus back on sports segmentation going forwards.
Nike's profits plummeted 86% in the previous quarter as it cleared out old inventory and reset its digital business through discounts and clearance channels. Neither has the delay to its much-vaunted NikeSkims collaboration with Kim Kardashian helped, a topic that was not discussed on the earnings call.
Revenue fell in all regions during the quarter but came in a little better than expected in North America, Nike's largest market, where sales fell 11% to $4.7 billion. Revenues in China were just below expectations at $1.48 billion and Nike is currently trialling new retail concepts with a local approach.
Nike Looks To Sports Segmentation
Since Hill took over as Nike's CEO in the fall, he has concentrated on winning back wholesale partners, while the company is also realigning internal teams to focus back on specific sports segments, Nike has also started selling on Amazon again for the first time since 2019. From this fall, Amazon will begin carrying an assortment of footwear, apparel and accessories and Nike will have a featured brand store on the platform for running, training, basketball and sportswear.
During the quarter, Nike released a new sneaker collection for A'ja Wilson from the Las Vegas Aces and the first drop sold out in three minutes flat. The company plans to double the pairs available in the coming seasons and sneakers remain the most important category in Nike's business, although apparel is growing and represented about 28% of Nike brand revenue in its last fiscal year.
Where Nike has been lagging is in womenswear, which has become a long-standing issue. The buoyant athleisure sector has also seen a host of specialist players enter the market, focused on everything from the gym and boxing to yoga, while brands such as On continue to take Nike's market share.
Hill came out of retirement last year to lead the revival of the all-powerful sports brand and retailer but from field to mat, track to ring, the industry is becoming increasingly competitive and fragmented.
Tariffs have hardly helped for a business that has leveraged global supply chains but Hill remained confident that the hard yards are finally behind Nike.