Nike has announced that US tariffs on imports are set to increase its operating costs by approximately $1 billion, prompting the company to accelerate efforts to reduce its dependence on Chinese manufacturing. The sportswear giant outlined strategic measures to offset the impact of rising costs, including supply chain diversification, price adjustments, and a renewed focus on core sportswear innovation.
Chief Financial Officer Matthew Friend stated that China currently accounts for around 16% of Nike’s US footwear imports. The company intends to reduce this figure to a high single-digit percentage by the end of May 2026 through expanded production in other regions. “We are partnering with our suppliers and retail partners to mitigate this structural cost increase in order to minimise the overall impact to the consumer,” Friend said during a call with analysts.
To help absorb the financial pressure from tariffs, Nike has already implemented price increases across selected product lines. Despite these headwinds, shares of Nike rose 11% in after-hours trading, buoyed by a better-than-expected financial performance.
For the fourth quarter, Nike posted a 12% decline in revenue to $11.10 billion. This was less severe than analysts’ forecast of a 14.9% fall to $10.72 billion, according to LSEG data. The company also exceeded profit estimates, reflecting early gains from Chief Executive Elliott Hill’s renewed emphasis on sport-driven marketing and product innovation.
Having previously ceded ground in the rapidly expanding running category, Nike has scaled back on legacy sneaker models such as the Air Force 1 and intensified investment in performance footwear, including the Pegasus and Vomero lines. The running division returned to growth in the fourth quarter, signalling early success in the company’s repositioning efforts.
Hill, who took over as CEO in October last year, has committed to reinvigorating Nike’s identity as a sports-focused brand. On Thursday, the company staged a high-profile event in Paris, where athlete Faith Kipyegon attempted to run a sub-four-minute mile. Although the attempt fell short, it resulted in a new unofficial record, underscoring Nike’s renewed investment in elite sport and experiential marketing.
Nevertheless, challenges remain. Sales in China continue to underperform, with company executives acknowledging that a recovery in the market will take time, given current economic conditions and intensifying local competition. Inventories remained flat year-on-year at $7.5 billion as of 31 May, prompting caution among analysts.
“Nike’s inventories are still too high considering the sales declines. It was a tough quarter, but this was widely anticipated,” commented David Swartz, equity analyst at Morningstar Research.
Looking ahead, Nike forecasts a mid-single-digit decline in first-quarter revenue, a projection that is slightly more optimistic than market expectations of a 7.3% drop. The company remains focused on navigating macroeconomic volatility while reinforcing its leadership in the global athleticwear sector.
-Reuters
