Nike has always been front and center in athleisure. Its deep roots in running shoes stretch back to the 1960s, when it was founded by track and field athlete Phil Knight, and its high-profile relationship with basketball star Michael Jordan has won it a loyal following and turned some of its sneakers into coveted collector’s items, fetching thousands of dollars or more.
For instance, the Michael Jordan “Dynasty Collection,” including six sneakers worn by Jordan in eight separate playoff seasons, fetched a remarkable $8 million in a Sotheby’s auction in 2024.
Nike at a glance:
- Annual revenue in fiscal 2025: $46.3 billion, down from $51.3 billion in FY2024.
- Brands owned: Nike, Jordan, and Converse.
- Number of employees: 77,800
While Nike’s brand remains a go-to for sports stars and athletes of all ages, it’s lost some luster since Covid as newer footwear brands have emerged, including On and Hoka, and styles have shifted, resulting in robust sales at rivals, including Asics, which resale platform StockX says is the fastest-growing sneaker brand in the first half of 2025 thanks to Gel-1130.
Nike’s situation isn’t helped by the fact that stiff new tariffs enacted this year are creating a major problem for the footwear industry, crimping its profit, and forcing companies, including Nike, to make pricing decisions likely to frustrate shoe shoppers.
About 50% of Nike’s footwear is made in Vietnam, and a little less than 20% is made in China. Despite trade deals, both countries face stiff increases in tariffs this year.
Tariffs on Chinese imports into the U.S. settled at 30% while Vietnam’s tariffs are 20% following a trade agreement in August. Those tariffs land on pre-existing tariffs, so they hit Nike particularly hard.
On Nike’s earnings call on Sept. 30, CEO Elliott Hill said:
New reciprocal tariffs are stacked on top of the mid-teens rate NIKE already paid on imports. … With the new rates in effect today, we now estimate the gross incremental cost to NIKE on an annualized basis to be approximately $1.5 billion, up from the $1 billion we shared 90 days ago.
Nike’s CFO Matthew Friend said on the earnings call in May that customers would have to share the burden,
We have implemented a surgical price increase in the United States with phased implementation beginning in fall ’25.
Unfortunately, Nike acknowledged this week that it has also made another decision to shore up its financials that’s likely to disappoint shoppers.
Nike fans feel the pinch
Footwear is somewhat of a discretionary purchase, given that consumers wear their sneakers longer when times are tough or trade down, buying less pricey options.
Over the past few years, the U.S. economy has been doing okay, given low unemployment, rising gross domestic product, and wages that have generally outpaced inflation since inflation’s peak in 2022.
Related: Hoka sends harsh message to loyal customers
U.S. footwear industry at a glance:
- Market size: $113.7 billion in 2024
- Footwear sold: 2.5 billion pairs of shoes
- Tariffs paid previously: Approx. $3 billion industrywide annually
- Tariffs estimated in the future: Approx. $5 billion annually
Source: Footwear Distributors and Retailers of America (FDRA)
That’s helped support demand for higher-end sneakers, including Nike. Nike isn’t a luxury brand but focuses on quality and innovation, so its sneakers are more expensive than some rivals.
For example, its popular Nike Vomero 18 is sold for $155, the Airmax fetches over $100, and Air Jordans can go for over $200 on its website.
Unfortunately, inflation has started climbing again, partly because of tariffs, which could pressure shoppers’ budgets.
The Consumer Price Index showed inflation rose 2.9% year-over-year in August, up from 2.3% in April before most tariffs took effect. Footwear prices jumped 1.4% year-over-year, the most significant increase in 17 months, with women’s shoes spiking 2.8%, the most in two and a half years, according to FDRA.
The increased costs caused by tariffs have most footwear companies working overtime to protect their profits. As a result, companies like Nike are negotiating lower prices from suppliers and, unfortunately, increasing prices.
Nike’s recent struggles, evidenced by declining revenue over the past few years, have boxed it in.
Elliott Hill was Nike’s President of Consumer and Marketplace, leading all commercial and marketing operations for Nike and Jordan Brand, before retiring in 2020. In October 2024, he was appointed CEO in October 2024 to get Nike back on track.
As part of that effort, Nike is knee deep in cleaning up its inventory, cutting prices to retailers, and discounting items through its brick-and-mortar stores and online store.
This has created more bargains for shoppers; however, those deals will be harder to find as excess inventory shrinks.
As part of its restructuring, Nike has said it will return to being a “full-price” footwear company.
“When we get into the second half of fiscal year ’26, we expect to be in a clean marketplace, a healthy marketplace. And so that business in the second half will be more full price,” acknowledged Matthew Friend in May. “We believe the Win Now actions are the right actions to reposition NIKE as a full-price brand in a healthy market.”
In its call this week, Friend reiterated the pricing strategy for its direct-to-consumer business,
Nike’s financials face a stiff headwind
According to the FDRA, the footwear industry imports 99% of the products sold in the U.S. annually. As a result, companies like Nike are on the hook for significantly higher costs due to tariffs following recent trade deals, including with Vietnam.
More Retail Stocks:
- Popular office supply retailer sold after closing 1,000 stores
- T-Mobile plans a harsh change for customers after new CEO starts
- Kohl’s hopes generous offers will bring customers back to stores
In its May earnings call, Nike said tariffs would increase costs by $1 billion, prompting management’s comments that prices would head higher beginning this fall.
Unfortunately, that billion-dollar figure was too optimistic. When the dust settled, updated number crunching pegged the hit from tariffs to be 50% larger, totaling $1.5 billion, which will create a gross margin headwind in fiscal ’26 of 1.2%, up from prior predictions of 0.75%.
The drag comes even as Nike struggles to reignite sales growth. In its most recently reported quarter, revenue increased by just 1% to $11.7 billion. For perspective, its sales totaled $12.9 billion in the same quarter of 2023. For the full fiscal year, Wall Street expects Nike’s sales will total $46.7 billion.
Nike fiscal sales by year:
- 2026 (est): $46.7 billion
- 2025: $46.3 billion
- 2024: $51.4 billion
- 2023: $51.2 billion
- 2022: $46.7 billion
Source: Nike 10-K filings with the SEC. The 2026 estimate is the Wall Street consensus.
While full-year gross margins are expected to be down 1.2% this year, margins will be hit particularly hard this quarter.
Nike’s guidance for its fiscal second quarter (calendar quarter ending November) is for gross margin to decline by 3% to 3.75%, including a net headwind of 1.75% from new incremental tariffs.
Wall Street weighs in on Nike
Nike’s stock price has fallen sharply over the past few years as sales growth has stalled, tumbling 52% since 2021, including an 8.5% drop over the past 12 months.
The company’s turnaround plan may be taking hold, given last quarter’s 1% growth was the first year-over-year quarterly growth notched by the company since late 2023.
Still, Wall Street analysts remain mixed in their outlook.
Morgan Stanley analyst Alex Straton kept an equal-weight rating on the stocks, writing in a note to clients:
We recognize the positive [near term] rate-of-change story, but this is balanced by our
still-skeptical medium- to longer-term view… The print did little to solve our ongoing skepticism that NKE can return to its prior
growth & profitability… Incremental tariffs present a greater go-forward GM headwind.
Bank of America is more optimistic, with a buy rating and $84 price target, writing:
Sales improvement provides evidence that plan is working… Better than expected wholesale sales gives us increased confidence that the turnaround is well underway.
Related: AutoZone makes harsh decision customers won’t like
#Nike #sends #disappointing #message #loyal #customers