Nike has said it expects costs to increase by about $1bn (£728m) as a result of Donald Trump’s tariff war as the sportswear company looks to reduce its manufacturing in China.
The market value of the company has dropped by a third over the past year and it is taking action to reduce the hit, including increasing prices in the US and sourcing from other countries.
“These tariffs represent a new and meaningful cost headwind,” said Matthew Friend, Nike’s chief financial officer. “With the new tariff rates in place today, we estimate a gross incremental cost increase to Nike of approximately $1bn. We intend to fully mitigate the impact of these headwinds over time.”
Last year almost 60% of all Nike-branded apparel was made in Vietnam, China and Cambodia. Vietnam, Indonesia and China manufactured 95% of all Nike footwear last year.
“We have strong relationships with our factory partners, and our leadership team is experienced in managing through disruption,” Friend said. “Nike has consistently been a top payer of US duties. We will optimise our sourcing mix and allocate production differently across countries to mitigate the new cost headwind into the United States.”
He said manufacturing capacity and capability still remains important to the company, despite the 60% tariff rate imposed by the US, accounting for about 16% of footwear imports to America.
Friend said the business was working to minimise the impact on consumers.
However, he added that the company would implement a “surgical price increase” in the US from this autumn, and will aim to reduce overheads through “corporate cost reduction”.
Friend’s comments came as Nike reported its worst quarterly earnings in more than three years, as revenues slumped 12% to $11.1bn in the three months to the end of May.
Elliott Hill, the chief executive of Nike, said: “The results are where we planned. That said, we’re not happy with where we are.”
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Mamta Valechha, an analyst at Quilter Cheviot, said: “Nike continues to slump, with its fourth quarter the worst in at least two decades.”
She said the figures indicated Nike “may nearly be at rock bottom”, adding: “It has been a difficult period for Nike following the pandemic, and the threat of tariffs simply is not helping the situation for the company.”
