Nike-sponsored Faith Kipyegon approaches the finish line in Paris. She fell short of running a mile in under four minutes, but set a new unofficial record. (AP Photo/Christophe Ena)
REUTERS — Nike said it would cut its reliance on production in China to mitigate the impact from US tariffs on imports. It forecast a smaller-than-expected drop in first-quarter revenue, sending its shares up 11 percent in extended trading.
US President Donald Trump’s sweeping tariffs on imports from key trading partners could add around $1 billion to Nike’s costs. Company executives said so on a post-earnings call after the sportswear giant topped estimates for fourth-quarter results.
China is subject to the biggest tariff increases imposed by Trump. The country accounts for about 16 percent of the shoes Nike imports into the United States, CFO Matthew Friend said.
But the company aims to cut the figure to a “high single-digit percentage range” by end-May 2026. It is shifting production to other countries.
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.
Nike’s running segment finds its footing
CEO Elliott Hill’s strategy to focus product innovation and marketing around sports is beginning to show some fruit. The running category returned to growth in the fourth quarter after several quarters of weakness.
READ: Nike shares tumble on tepid outlook as CEO eyes Olympics marketing win
Having lost share in the fast-growing running market, Nike invested heavily in running shoes such as Pegasus and Vomero. This, while scaling back production of sneakers such as the Air Force 1.
“Running has performed especially strongly for Nike,” said Citi analyst Monique Pollard. She said new running shoes and sportswear products are expected to offset declines in Nike’s classic sneaker franchises at wholesale partner stores.
Marketing spending was up 15 percent 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.
Other star athletes paced Kipyegon in the glitzy and live-streamed from a Paris stadium. She fell short of the goal but set a new unofficial record.
READ: Shocked Kipyegon adds 5,000m world record to 1500m mark in Paris
Nike forecast first-quarter revenue to fall in the mid-single digits. This is slightly better than analysts’ expectations of a 7.3-percent drop, according to data compiled by LSEG.
Its fourth-quarter sales fell 12 percent to $11.1 billion. But it still beat estimates of a 14.9-percent drop to $10.72 billion.
China continued to be a pain point. Executives said a turnaround in the country will take time as Nike contends with tougher economic conditions and competition.
The company’s inventory was flat year-over-year at $7.5 billion as of May 31.