In This Article:
What Happened?
Shares of athletic apparel brand Nike (NYSE:NKE) fell 15% in the pre-market session after President Trump announced "reciprocal tariffs" on all US imports, set at a minimum rate of 10%.
From clothing brands and electronics makers to the e-commerce sites that move their goods, companies built on global supply chains took the biggest hit.
Stocks with heavy exposure to Asia were especially hard-hit, as the new tariffs threatened the growth and profits of firms with factories in the region. Vietnam, central to many companies' production plans, faced a 46% tariff. Cambodia and Indonesia were also in the crosshairs, with tariff rates of 49% and 32%. These measures could significantly erode the competitiveness of goods produced in those regions. For example, reduced production volumes would negatively affect the sales growth of all companies benefiting from these manufacturing hubs.
The shares closed the day at $55.56, down 14.5% from previous close.
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What The Market Is Telling Us
Nike’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. Moves this big are rare for Nike and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 13 days ago when the stock dropped 8.5% on the news that the company reported third-quarter (fiscal 2025) results which came in soft, showing that the company's turnaround was still a work in progress. Sales continued to fall, and, margins shrunk underscoring ongoing challenges. Revenue, when adjusted for currency fluctuations, fell 7% year-over-year, a sharp contrast to flat growth in the same quarter last year. Nike's focus on reviving its product portfolio and digital strategy had yet to translate into meaningful top-line growth, as weakness in its wholesale business (sales generated from retail partners, Designer Brands, Hibbett, and JD Sports) and sluggish demand in North America weighed on sales.
Despite the revenue weakness, Nike exceeded analysts' EPS expectations, benefiting from the ongoing share repurchase program, which helped offset some of the pressure on profits as gross margin fell due to higher promotional activity and unfavorable product mix. Overall, the quarter fell short of expectations, with strong EPS results overshadowed by weak revenue trends and margin pressures.