Nike shares rally as turnaround takes shape amid tariff woes
Nike shares surged 10% in premarket trading today as an encouraging forecast and plans to reduce China production for US-bound goods bolstered confidence in an ongoing turnaround effort at the sportswear giant.
Major US brands have spent years shifting away from Chinese factories as political tensions between Washington and Beijing escalated, but President Donald Trump's latest import tariffs are pushing companies to hasten their retreat.
Nike plans to cut the percentage of US-bound goods made in China to a "high single-digit percentage range" by the end of May 2026. China currently accounts for about 16% of the shoes it imports into the United States.
Trump's sweeping tariffs could also add around $1 billion to Nike's costs, executives said on Thursday, after the company posted its worst sales decline in roughly five years but gave a better-than-feared revenue forecast for the first quarter.
"There was basically no profit, China was down 20%, that's not a good result... But as usual, the markets are pricing in what's coming and not what has been in the results," said Simon Jaeger, portfolio manager at Flossbach von Storch in Cologne, Germany, which holds shares in Nike.
A lot of the focus was also on how Nike's running segment was bouncing back from a stretch of sluggish demand.
The recovery was partly thanks to new CEO Elliott Hill's efforts to claw back market share in the running space with new launches. Nike has invested in running shoe and sneaker lines such as Pegasus and Vomero, and cut its stock of older models including the Air Force 1 and Air Jordan 1 through discounts.
Hill is also looking to rekindle relationships with wholesale partners and expand its presence in more physical retailers as part of the wider revamp.
"We think longer-term investors can now start to rotate back into the stock as one of the biggest potential turnarounds in consumer," analysts at Evercore ISI said in a note.
Its results also helped shares of German peers Adidas and Puma and London-listed sportswear retailer JD Sports between 3% and 7%.
"Nike executives also said they were nearly done with clearing out old inventory, which is a relief for Adidas, Puma, and JD Sports, who were having to compete with aggressive discounting from the bigger sportswear brand," Jaeger said.
Nike shares are down 17.4% so far this year, while its 12-month forward price-to-earnings ratio is 1.90, compared with 1.58 and 0.64 for Adidas and Puma, respectively.
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