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- Nike stock surges as company forecasts smaller sales, profit drops while tariff costs near $1 billion</p>
<p>Brooke DiPalmaJune 27, 2025 at 3:39 AM</p>
<p>Nike (NKE) stock rallied in premarket trade on Friday after the sneaker giant said its profit and sales declines would narrow in the current quarter, while the costs from tariffs are expected to approach $1 billion.</p>
<p>Shares were over 9% higher on the heels of the footwear maker's quarterly earnings update late Thursday.</p>
<p>Nike expects sales to be down by mid-single digits in the current quarter, following a 12% drop in revenue during its fiscal fourth quarter ended May 31,</p>
<p>Gross margins, which fell by 440 basis points, or 4.4%, in its fourth quarter, are forecast to fall by 350-425 basis points in the current quarter.</p>
<p>On its conference call with investors late Thursday, Nike CFO Matthew Friend said newly implemented US tariffs "represent a new and meaningful cost headwind." Nike expects a 100 basis point negative impact on its gross margins as a result of tariffs.</p>
<p>Friend added the company sees a "gross incremental cost increase to Nike of approximately $1 billion," adding, "We intend to fully mitigate the impact of these headwinds over time."</p>
<p>On Thursday, Nike said it plans to cut its reliance on China for manufacturing the goods it sells in the US, as part of this strategy. Chinese suppliers currently account for about 16% of the shoes it imports into the US, per Reuters.</p>
<p>Nike has grappled with the sweeping tariffs announced by President Trump, with those impacts still uncertain given its global operational footprint and exposure both to China and Vietnam.</p>
<p>For its fiscal fourth quarter, ended May 31, Nike reported revenue of $11.1 billion, a 12% decline that was lower than Wall Street forecasts for a nearly 15% decline to $10.72 billion, according to Bloomberg data. Adjusted earnings per share tallied $0.14, compared to the forecast $0.13 per share. That was far lower than the $1.01 per share in earnings it reported in the same quarter last year.</p>
<p>Same-store sales at Nike-owned stores ticked higher, rising 2% compared to the 2.6% decline analysts anticipated.</p>
<p>"While our financial results are in line with our expectations, they are not where we want them to be. Moving forward, we expect our business to improve as a result of the progress we're making," CEO Elliott Hill said in the release.</p>
<p>Alongside the tariffs headwinds, Nike is also facing deteriorating consumer confidence as it aims to get customers back in stores and competes with rivals like On (ONON) and Hoka (DECK).</p>
<p>Read more: What Trump's tariffs mean for the economy and your wallet</p>
<p>Nike stock is down more than 34% year over year but has rebounded from April 8 lows when President Trump imposed additional tariffs of 104% on China before pausing them in May. There is currently still a 10% tariff on imports from most countries in place, alongside a 30% tariff on goods from China.</p>
<p>But Nike seems to have prepared for this. The company has been diversifying its manufacturing base since Trump's first term in office. In 2024, it produced 18% of its apparel and 16% of footwear in China, compared to 26% and 29%, respectively, in 2016.</p>
<p>Friend said the company expects to reduce the amount of footwear it imports from China to the "high-single digit range by the end of fiscal 2026" by reallocating supply from China to other countries. It also plans to partner with suppliers and retail partners to take on some of the cost and raise prices for US consumers beginning this fall.</p>
<p>Yet, Nike's struggles in the China market continue. In the region, fourth quarter revenue fell 20%. Lower equipment sales, down 33%, drove the decline, but footwear and apparel sales also dropped by 20% and 19%, respectively.</p>
<p>The company is also banking on certain innovations like the launch of Vomero 18, Jordan Retros, A'One, and a collaboration with Kim Kardashian. Nike is also patching up its wholesale partnerships with the likes of Dick's Sporting Goods (DKS) and Macy's (M) after it decided to focus on its direct-to-consumer business.</p>
<p>Wholesale revenue was down 9% from a year ago, coming in at $6.4 billion for its fourth quarter.</p>
<p>"Progress will be the key theme" for the call with investors Thursday after market close, Telsey Advisory Group analyst Cristina Fernández wrote to clients in a note.</p>
<p>"Nike seems several quarters away from reaching stabilization in the business, but is making the right moves by cleaning up inventory, rebalancing the product portfolio by increasing newness and reducing the focus on classic franchises, and strengthening relationships with wholesale partners," Fernández wrote.</p>
<p>Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at [email protected].</p>
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