Nike thumps expectations despite 31% fall in earnings
Sportswear company takes financial hit from Donald Trump’s tariffs
Nike reported revenue and profits that surpassed expectations, showing its turnaround efforts are beginning to take hold even as the shoe and sportswear company warned of a $1.5bn hit from US tariffs.
Shares rose 4 per cent in after-hours trading after Nike reported revenue of $11.7bn in the quarter that ended in August, up 1 per cent year on year and beating the consensus estimate of $11bn.
Net profit was $727mn, down 31 per cent year on year but almost double estimates from analysts polled by Visible Alpha.
The world’s largest athletic goods company has faltered in recent years under pressures including the rise of competing brands such as On and Hoka, the after-effects of a move into direct-to-consumer sales as well as the costs of President Donald Trump’s tariff policy.
Nike chief executive Elliott Hill returned from retirement last year to attempt a turnaround. Revenues were driven by a 7 per cent rise in its wholesale business supplying third-party stores such as Foot Locker. The company has sought to rebuild relationships with retailers and refocus on core product lines such as performance running shoes after drifting into casual wear.
“Nike’s journey back to greatness has only just begun,” Hill said on a call with analysts.
Tariffs on imports from manufacturing centres in China and south-east Asia have increased costs for shoe companies such as Nike. Factories in Vietnam, now subject to a 20 per cent tariff, made more than half of the group’s footwear last year and almost a third of its apparel.
Based on the latest levies, Matthew Friend, chief financial officer, raised his estimate of the annual cost of tariffs to about $1.5bn, up 50 per cent from the $1bn forecast three months ago and equal to about 3 per cent of Nike’s $46.3bn in revenue last year. The company has been shifting sites of production to help manage tariff costs.
Nike’s revenues rose in every region but greater China, where they dropped 10 per cent to $1.5bn. Operating profit in China fell 25 per cent to $377mn.
Hill said the market was facing “structural challenges”, but “we believe in the long-term opportunity in China” with the promise of sales of running, training, basketball and football shoes and gear.
Nike’s gross profit margin declined from 45.4 per cent to 42.2 per cent year on year, “primarily due to lower average selling price, reflecting higher discounts and channel mix, as well as higher tariffs in North America”, it said.
Hill said his team took a lesson from England’s close football victory over Spain in the 2025 Uefa Women’s European Championship, which he said he watched in person.
“That is a team that knows what it takes to make a comeback. We were all inspired here at Nike,” Hill added.