Major brands have spent years shifting away from Chinese factories for the US market as political tensions between Washington and Beijing escalated, but President Donald Trump’s latest import tariffs are pushing companies to hasten their retreat.
Nike plans to reduce imports from China into the US to the high-single digit percentage range, from 16% currently, to absorb some of the US$1 billion increase in tariff-related costs it anticipates.
“There was basically no profit, China was down 20%, that’s not a good result… But as usual, the markets are pricing in what’s coming and not what has been in the results,” said Simon Jaeger, portfolio manager at Flossbach von Storch in Cologne, Germany, which holds shares in Nike.
CEO Elliott Hill’s focus on reclaiming the brand’s sports roots through innovation and marketing was evident in the success of the newly launched Vomero 18 shoes lines in boosting the running category back into growth, analysts said.
“This one-time darling of investors has clearly been off its game in recent years, but we believe that the worst may nearly be over,” said Needham Securities analyst Tom Nikic, adding that the CEO transition from John Donohoe to Nike veteran Hill was the biggest catalyst of change.
Nike has also doubled down on its return to a more multi-channel sales approach from its direct-to-consumer-focused strategy in 2020, including a return after six years to selling on Amazon as it looks to reach a wider customer base.
Inventory clearing through discounts on lifestyle brands such as Air Force 1 and Dunk has also put the company on track to exit the first half of fiscal 2026 in a “healthy and clean position”, CFO Matthew Friend said on a post-earnings call yesterday.
The company is also utilising its roster of Nike-backed athletes better now compared with the past few years, said UBS analyst Jay Sole.
The delay in the much-anticipated launch of Nike’s product with Kim Kardashian’s shapewear brand Skims was also a good sign that the company is truly getting refocused on sports and athletes, he said.
Stocks of Adidas, Puma and JD Sports also jumped between 3% and 7%, while other sportswear retailers such as On Running and Deckers Outdoors gained around 2%.
Nike recorded its worst sales drop in five years in the fourth quarter, falling 12% to US$11.10 billion, but beat estimates for a 14.9% fall.
It forecast first-quarter revenue to fall in the mid-single digits, slightly better than analysts’ expectations of a 7.3% drop, according to data compiled by LSEG.
Nike shares are down 17.4% so far this year, while its 12-month forward price-to-earnings ratio is 1.90, compared with 1.58 and 0.64 for Adidas and Puma, respectively.
At least 11 brokerages raised their target price on Nike today, with HSBC upgrading the stock to “buy” from “hold”.