Nike concluded its fiscal year 2025 in May with a significant financial contraction, reflecting the escalating pressures of geopolitical volatility and trade uncertainties. The sportswear giant reported one of its most challenging performances in decades, underscoring the imperative for strategic recalibration amidst a complex global economic landscape.
Financial Performance and Strategic Adjustments
For the full fiscal year ending May 2025, Nike’s revenues declined 10% to $46.3 billion, while net income plummeted 44% year-over-year to $3.2 billion. The final quarter exacerbated this trend, with revenues falling 12% to $11.1 billion and net income collapsing 86% to $211 million. Mamta Valechha, a consumer discretionary analyst at Quilter Cheviot, characterized the fourth quarter as Nike’s “worst in at least two decades,” although sales marginally exceeded low market expectations.
Chief Executive Officer Elliott Hill candidly acknowledged the sub-par results for FY25, stating they were not up to the Nike standard. He emphasized the company’s active efforts toward repositioning, a strategy that notably includes adjustments to its global supply chain in response to shifting trade dynamics.
A primary driver of these strategic shifts is the significant tariff burden on US imports from China, currently at 55% under a recent framework agreement. Nike plans to substantially reduce its reliance on Chinese manufacturing for US-bound footwear, aiming to decrease China’s contribution from approximately 16% to a high-single-digit percentage by the end of fiscal year 2026. This realignment is projected to incur an additional $1 billion in tariff-related costs for the current fiscal year.
Looking ahead, Nike anticipates continued headwinds in the first quarter of the current fiscal year, projecting mid-single-digit revenue declines. Gross margins are expected to decrease by approximately 350 to 425 basis points, with tariffs accounting for around 100 basis points of this impact. Despite the challenging outlook, Mamta Valechha noted a rally in Nike’s share price post-announcement, signaling investor anticipation of a potential turnaround.
Valechha underscored that while improved inventory management and reduced discounting will provide some relief, Nike’s long-term recovery hinges on its capacity to innovate and deliver compelling new products that reignite consumer demand. The company’s journey post-pandemic has been arduous, with geopolitical tariffs adding another layer of complexity to its operational and financial challenges. Following the announcements, Nike’s shares climbed nearly 10% in after-hours trading in the US.
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