:max_bytes(150000):strip_icc()/GettyImages-2221276283-704034b4fe3b4fd1a96f7388ced43705.jpg "Nike’s Turnaround Looks Like It’s Going Well—But Tariffs Could Be a Stumbling Block")
:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-2221276283-704034b4fe3b4fd1a96f7388ced43705.jpg)
Key Takeaways
- Nike shares are rising after the company said wholesale revenue rose and running gear sales took off last quarter.
- The athletic brand’s turnaround still faces a number of challenges, including higher tariff costs than previously anticipated and weak sales of its “classic” footwear franchises.
The revamp of Nike’s brand made headway last quarter, according to executives, but another high hurdle—rising tariff expenses—looms.
Nike (NKE) reported better first-quarter results than expected Tuesday evening. CEO Elliott Hill said the “Win Now” turnaround campaign is working, as evidenced by a 5% year-over-year bump in wholesale revenue and 20% jump in running gear sales over the course of the quarter.
The company also touted robust spring wholesale orders, a strong early response to its collab with Kim Kardashian and the prospect of momentum around the World Cup next summer. Investors have broadly cheered Nike’s in-process recovery: Its shares were recently up 5%, only about 1% below where they finished 2024, and analysts tracked by Visible Alpha on average expect them to approach $83.
“I’m even more convinced that the Win Now actions are absolutely the right focus for our teams,” Hill said, according to a transcript made available by AlphaSense. “With that said, we’re also realistic that we are turning our business around in the face of a cautious consumer, tariff uncertainty and teams that are settling [in].”
Why This News Matters to Nike Investors
A number of shoe companies have traditionally finished footwear in China and other Asian countries subject to import taxes. As Nike’s situation illustrates, trade-policy is constantly evolving, which could mean unexpected swings in expenses. Nike’s shares, meanwhile, appear to be back in favor with investors after a rough run.
The company said it now expects to pay $1.5 billion annually in tariffs, up from a projected $1 billion last quarter, CFO Matthew Friend said on the conference call. Nike finishes much of its footwear in countries subject to import taxes—as do other shoe companies, such as Steve Madden (SHOO) and the maker of Vans, VF Corp. (VFC), according to transcripts of the companies’ conference calls.
About 51% of Nike brand footwear was completed in Vietnam last fiscal year; 28% in Indonesia; and 17% in China, its annual report said. The brand is reducing how much production it does in China, where tariffs are now at 54% but were once at 145%, as well as working with partners to reduce costs and increasing prices, Friend said in June.
Nike has other challenges: classic footwear franchises, which includes Jordan and Converse shoes, were down 30% in North America, Hill said. The company is focusing less on them, and looking to expand its sports gear business, he said. Overall traffic and transactions will likely lag as the company pulls back on promotions, Citi said.
“The sales recovery is not expected to be ‘linear,’” Citi analysts said. They said “full-priced stores are not selling through at the rate [management] would like to see.”
Nike anticipates finishing the current quarter with a low, single-digit percent decline in sales and lower profit margins, Friend said.
It reported $11.7 billion in sales, compared to the $11 billion consensus estimate among analysts polled by Visible Alpha, and $0.49 in diluted earnings per share.
