Beaverton, OR – March 21, 2025 – Nike Inc. (NYSE: NKE) shares plunged 7% on Friday morning after the athletic giant warned that President Donald Trump’s newly imposed tariffs are weighing heavily on its operations and earnings outlook. Despite beating modest earnings expectations last quarter, Nike’s leadership flagged geopolitical tensions, volatile currency rates, and mounting trade costs as significant headwinds.
Earnings Highlights and Tariff Impact
For the quarter, Nike reported:
- Revenue of $11.3 billion, slightly above estimates.
- Earnings of 54 cents per share, beating expectations.
However, the company issued a cautious fourth-quarter outlook, citing the fallout from Trump’s 20% tariffs on imports from China and Mexico. - According to CFO Matthew Friend, the tariffs impact about 24% of Nike’s suppliers, creating margin pressure that may be difficult to offset without raising prices.
- Fourth-quarter gross margins are projected to drop by 400 to 500 basis points, partly due to restructuring charges from the previous year.
China Sales and Supply Chain Concerns
Nike’s sales in China plunged 17%, driven by the tariffs and softening consumer demand.
- While rivals like Costco and Walmart have pressed their Chinese suppliers to absorb the additional U.S. tariffs, Nike’s leadership did not indicate whether it plans to take a similar stance.
- Instead, CEO Elliott Hill highlighted efforts to strengthen supply chain operations and observe new product innovations during recent factory visits in Asia.
Inventory Challenges and Discounting
Margins remain under strain as Nike works through excess inventory, resorting to deep discounts on classic styles to clear stock.
- However, Hill expressed confidence in the company’s long-term strategy, emphasizing a renewed focus on sports as the “right path forward.”
Wall Street Reaction
The stock’s sharp decline reflects growing investor concerns over the impact of tariffs on Nike’s profitability.
- With nearly a quarter of its supply chain exposed to the new duties, analysts warn that further margin compression could be on the horizon if the company fails to pass along costs to consumers.
The Road Ahead
As Trump’s tariffs reshape global trade dynamics, Nike faces mounting pressure to navigate higher costs while maintaining its competitive edge.
- With ongoing inventory issues, foreign exchange volatility, and weaker Chinese demand, the company’s ability to protect its margins will be closely watched by investors in the coming quarters.
