Sneaker giant forecasts mid-single digit sales drop, cuts China reliance
Nike shares soared 15.2% on Friday after the company projected that profit and revenue declines will moderate in the current quarter, offering investors renewed optimism despite lingering tariff and supply chain headwinds.
On Thursday, Nike said it expects a mid-single-digit sales drop in the current quarter, an improvement from the 12% year-over-year revenue decline posted for its fiscal fourth quarter ended May 31. Gross margins fell 440 basis points in the quarter and are forecast to decline another 350 to 425 basis points in the current period.
The rebound in investor sentiment narrowed Nike’s year-to-date losses to under 5%, a stark recovery from its 30% drop earlier this year. CFO Matthew Friend told investors that newly imposed U.S. tariffs represent a “meaningful cost headwind,” with estimated gross incremental costs of $1 billion and a 100 basis point drag on gross margins.
Shifting away from China and raising prices
In response to mounting tariff pressure, Nike announced plans to reduce its manufacturing dependence on China. Currently, 16% of Nike’s shoes sold in the U.S. come from Chinese suppliers. That figure is expected to fall to the high single-digit range by fiscal year-end. To offset higher input costs, Nike will implement “surgical” price increases in the U.S. beginning this fall.
Nike has been diversifying its production footprint since Trump’s first term. In 2024, 16% of its footwear and 18% of apparel came from China, down from 29% and 26%, respectively, in 2016. However, China continues to weigh heavily on results. Sales in the region dropped 20% last quarter, with footwear and apparel each posting double-digit declines.
Quarterly results beat forecasts but lag prior year
For the fiscal fourth quarter, Nike reported revenue of $11.1 billion, surpassing Wall Street’s $10.72 billion forecast. Adjusted earnings per share came in at $0.14, slightly ahead of estimates but far below the $1.01 reported a year earlier. Same-store sales at Nike-owned outlets rose 2%, better than the 2.6% decline analysts had projected.
“While our financial results are in line with our expectations, they are not where we want them to be,” CEO Elliott Hill said in the earnings release. “Moving forward, we expect our business to improve as a result of the progress we’re making.”
Facing tough competition, Nike banks on innovation and DTC reset
Alongside macro pressures like tariffs and slowing consumer demand, Nike is battling rising competition from athletic brands On and Hoka. It’s also recalibrating its wholesale strategy, reviving relationships with partners like Dick’s Sporting Goods and Macy’s after years of prioritizing direct-to-consumer sales.
To regain momentum, Nike is banking on innovation. Key upcoming product launches include the Vomero 18, Jordan Retros, A’One, and a long-awaited collaboration with Kim Kardashian. The company hopes these efforts will reenergize demand and support a broader turnaround in the quarters ahead.