According to a report by Vietnamese media citing Reuters, import tariffs will cause Nike's costs to soar, but as it raises prices and adjusts its supply chain, costs may gradually decline.
On June 26th, sportswear company Nike released its quarterly results for the period ending May 31st. Data shows that Nike's net profit was 211 million US dollars, a decrease of 86% compared with the same period last year. Revenue also dropped by 12% to 11.1 billion US dollars.
Although the worst period may have passed, Nike still faces new challenges, such as tariffs imposed by the United States on its trading partners, which will complicate its efforts to turn losses into profits. Chief Financial Officer Matthew Flender said, "We expect the tariffs to increase Nike's costs by approximately $1 billion for the fiscal year 2026, which begins on June 1."
He predicted that as Nike adjusts its supply chain, collaborates with factories and retail partners and raises prices, costs will decline over time.
Currently, 16% of the company's supply chain is located in China. The company plans to reduce this proportion to below 10% by the end of the fiscal year 2026 (i.e., by next summer). However, Flender said, "China's manufacturing capacity is crucial to our global supply chain."
Nike's profits declined in the last quarter due to its significant price cuts to clear inventory, its efforts to secure wholesale partners and its restructuring of online business. Returning to wholesale partners will hurt its profits in the short term, but Nike said that in the long run, its financial situation will be more stable.
Revenue from the North American market still accounts for the largest share, reaching 4.7 billion US dollars. Revenue from the Chinese market reached 1.48 billion US dollars, in line with analysts' expectations. Chief Executive Officer Elliot Hill said that due to the uniqueness of the Chinese market, its recovery will take time. The company is facing more competitors in the Chinese market and needs more time to clear its inventory. Nike is also attempting a new retail model that focuses on localization.
Last quarter, the online sales of this sportswear company dropped by 26%, and its wholesale business declined by 9%. Meanwhile, the sales of physical stores increased by 2%, becoming a major highlight.
Flanders said that the company would consider cutting costs, but the top priority is to stabilize the business, which requires additional investment.
Nike warned that the last quarter was the bottom for its turnaround, but the situation deteriorated further in the following months, raising doubts among investors about whether the pain was truly over.
The fourth-quarter and full-year 2025 financial results we just announced did not meet Nike's standards. But as we said 90 days ago, the measures we took to reposition our business have begun to bear fruit. "We expect performance to improve from now on," Hill assured investors. He said it was time to "turn a new page".
The company expects its revenue to decline by several percentage points this quarter, and its gross profit margin will also drop by 3.5% to 4.25%.
After taking office last October, Hill reversed many of the strategies of his predecessor John Donahoe. After Donahoe implemented its direct selling strategy, Hill made efforts to re-establish contact with its wholesale partners. Hill also brought Nike back to the sportswear sector, no longer focusing too much on lifestyle products.
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