Tariffs Push Nike’s Costs Higher, With $1 Billion Hit on the Horizon

Nike has new hurdles to jump in its particular obstacle course. The US company, immersed in a restructuring plan under the leadership of Elliott Hill, is putting figures to the tariff war unleashed by Donald Trump, President of the United States. The Beaverton-based multinational’s calculations point to a gross cost increase of €1 billion, which will damage its already battered profit.

The sports equipment group ended the 2024 financial year with a 44% drop in net income, to $3.219 billion, while gross profit fell by 14% and gross margin fell by 190 basis points to 42.7%. In the fourth quarter, Nike’s net income fell 86%.

“Over the past fifty years, Nike has built an expansive, responsive and resilient global supply chain,“ Nike CFO Matthew Friend noted last Friday, “Nike has consistently been a major contributor of tariffs in the U.S., with an average tariff rate on footwear imported into the U.S. hovering around 15%. “Therefore, these tariffs represent a significant new cost barrier, and we are taking action that balances the interests of consumers,“ he added.

Speaking to analysts on the occasion of its fiscal 2024 earnings presentation, Nike detailed some of the measures it plans to put in place to try to tamp down the impact of the escalating tariffs. First, the company wants to “optimize” its supply mix and distribute its production differently between countries to “mitigate the new costs that will affect the United States”.

“These tariffs represent a new and significant obstacle in terms of costs,“ said Friday CFO

“Despite the current high tariffs on Chinese products imported into the U.S., manufacturing capacity and resources in China remain important to our global supply base,“ the CFO detailed Friday; China currently accounts for approximately 16% of the footwear we import into the United States, and we expect this figure to be reduced to a high single-digit percentage by the end of fiscal 2026 by reallocating supply from China to other countries around the world.“

Second, Nike claims to be “collaborating” are its suppliers and distribution partners to “mitigate this structural cost increase in order to minimize the overall impact to the consumer.“ “These agreements with our partners will come into effect at different times throughout fiscal 2026,“ Friend detailed.

Third, as part of its “usual seasonal planning approach,“ Nike has implemented a “surgical increase” in prices in the U.S., to be implemented in phases starting in the fall of 2025. Finally, the company will evaluate “corporate cost reductions as needed.“

Nike’s CFO also stressed that the group intends to “fully mitigate the impact of these adverse factors as we implement and annualize the measures I have described.“ “For fiscal 2026, we expect this financial impact, net of the measures described above, to be approximately 75 basis points on gross margin, with the largest impact in the first half,“ he detailed.