Nike has announced that it will raise costs as US President Donald Trump’s tariffs on China continue to impact the sportswear giant. The company expects the tariffs to add about $1 billion to its costs, with China accounting for about 16% of the shoes Nike imports into the US. However, Nike aims to cut its reliance on production in China for the US market to mitigate the impact of the tariffs.
Chief Financial Officer Matthew Friend said that Nike will “optimise our sourcing mix and allocate production differently across countries to mitigate the new cost headwind into the United States.” The company has already announced price increases for some products in the US and will “evaluate” corporate cost reductions to deal with the tariff impact.
Nike’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. The company’s shares zoomed 15% at the opening bell on Friday morning after it announced the change in conjunction with its earnings report released on Thursday.
US Treasury Secretary Scott Bessett said on Friday that a trade deal with China could be on the horizon, with the administration potentially having a deal with Beijing by Labor Day, September 1. Under the deal, the US will likely impose 55% tariffs across the board on Chinese goods, down from 145%. According to a survey from Allianz Global Trade last month, 38% of businesses say they will need to raise prices for consumers, with Nike being the latest.
In April, competitor Adidas said it would need to eventually raise prices for US consumers. “Cost increases due to higher tariffs will eventually cause price increases,” CEO Bjorn Gulden said at the time.
Walmart said last month that its customers will see higher price tags in its stores as the nation’s biggest big box retailer prepares for back-to-school shopping season. Target, which had a bad first quarter driven by boycotts and the looming threat of tariffs, also has been hit as the big box retailer gets 30% of its goods from China.
Nike forecast first-quarter revenue to fall in the mid-single digits, slightly better than analysts’ expectations of a 7.3% drop. Its fourth-quarter sales fell 12% to $11.10 billion, but still beat estimates of a 14.9% drop to $10.72 billion.
China continued to be a pain point, with executives saying a turnaround in the country will take time as Nike contends with tougher economic conditions and competition.