(Reuters) 鈥 Nike NKE.N said it would cut its reliance on production in China for the U.S. market to mitigate the impact from U.S. tariffs on imports, and forecast a smaller-than-expected drop in first-quarter revenue, sending its shares up 11% in extended trading.
U.S. President Donald Trump鈥檚 sweeping tariffs on imports from key trading partners could add around $1 billion to Nike鈥檚 costs, company executives said on a post-earnings call after the sportswear giant topped estimates for fourth-quarter results.
China, subject to the biggest tariff increases imposed by Trump, accounts for about 16% of the shoes Nike imports into the United States, Chief Financial Officer Matthew Friend said.
But the company aims to cut the figure to a 鈥渉igh single-digit percentage range鈥 by the end of May 2026 as it reallocates China production to other countries.
鈥淲e will optimize our sourcing mix and allocate production differently across countries to mitigate the new cost headwind into the United States,鈥 he said on a call with investors.
Consumer goods is one of the most affected areas by the tariff dispute between the world鈥檚 two largest economies, but Nike鈥檚 executives said they were focused on cutting the financial pain.
Nike will 鈥渆valuate鈥 corporate cost reductions to deal with the tariff impact, Friend said. The company has already announced price increases for some products in the U.S.
鈥淭he tariff impact is significant. However, I expect others in the sportswear industry will also raise prices, so Nike may not lose much share in the U.S.,鈥 said David Swartz, analyst at Morningstar Research.
CEO Elliott Hill鈥檚 strategy to focus product innovation and marketing around sports is beginning to show some fruit with the running category returning to growth in the fourth quarter after several quarters of weakness.
Having lost share in the fast-growing running market, Nike has invested heavily in running shoes such as Pegasus and Vomero, while scaling back production of sneakers such as the Air Force 1.
鈥淩unning has performed especially strongly for Nike,鈥 said Citi analyst Monique Pollard, adding that new running shoes and sportswear products are expected to offset the declines in Nike鈥檚 classic sneaker franchises at wholesale partner stores.
Marketing spending was up 15% year-on-year in the quarter. On Thursday, Nike hosted an event in which its sponsored athlete Faith Kipyegon attempted to run a mile in under four minutes.
Paced by other star athletes in the glitzy and live-streamed from a Paris stadium, Kipyegon fell short of the goal but set a new unofficial record.
Nike forecast first-quarter revenue to fall in the mid-single digits, slightly better than analysts鈥 expectations of a 7.3% drop, according to data compiled by LSEG.
Its fourth-quarter sales fell 12% to $11.10 billion, but still beat estimates of a 14.9% drop to $10.72 billion.
China continued to be a pain point, with executives saying a turnaround in the country will take time as Nike contends with tougher economic conditions and competition.
The company鈥檚 inventory was flat year-over-year at $7.5 billion as of May 31.