Nike stock tanks along with other footwear retailers on Trump tariffs

Yahoo Finance
04-03

Footwear stocks are plummeting on Thursday as reciprocal tariffs hit key names within the sector like Nike (NKE).

Shares of the sneaker giant tumbled as much as 13% on Thursday morning and are expected to hit their lowest level since November 2017.

As of April 5, all imports will face a baseline tariff of 10%. On April 9, some 60 countries will get a higher rate. China is facing a 34% reciprocal tariff on top of the 20% tariff already in place, making it a total of 54%. Vietnam is facing a 46%, and Indonesia 32%.  

Nike sources 11% of its products from China, 44% from Vietnam, and 21% from Indonesia. 

Read more: What Trump's tariffs mean for the economy and your wallet

"What President Trump presented ... was a little bit more aggressive than what I think many people were hoping," Telsey Advisory Group's Joe Feldman told Yahoo Finance. Many retail companies "thought they were off the hook for a while because they didn't have a lot of exposure to China, or not a lot to Canada, Mexico ... [they're] clearly rethinking everything right now."

Prior to Wednesday's announcement, Nike expected tariffs would hit its fourth quarter margins, but only based on the previous 20% duty on China.

"We expect fourth quarter gross margins to be down approximately 400 to 500 basis points, including restructuring charges during the same period last year. We have included the estimated impact from newly implemented tariffs on imports from China and Mexico," CFO Matthew Friend said on its earnings call. 

Now, Stifel apparel analyst Jim Duffy estimates that the tariffs could hit Nike's earnings per share this year by $1.69, per a client note. 

Other footwear companies taking a hit include Deckers Outdoor Corp. (DECK), Crocs (CROX), On (ONON), and Skechers (SKX), which are down 18%, 17%, 9%, and 20%, respectively. 

Most of them, in addition to sportswear names like Lululemon (LULU) and VF Corp. (VFC), are exposed to regions with the highest reciprocal tariffs.

Read more about industry stock moves and today's market action.

William Blair analyst Sharon Zackfia estimates that Lululemon, which sources approximately 54% of its products from China, Vietnam, and Indonesia, will see an impact on margins of roughly 720 basis points.

It remains to be seen how the added costs are spread between suppliers, companies, and customers. Brands can try to negotiate with suppliers to take some of the hit. Other potential mitigation tactics include cost-cutting measures and a higher price for consumers.

"Assuming the full margin hit with no mitigating factors translates to a 25%-plus headwind to our current 2026 EPS estimate," Zackfia noted. Lululemon's stock dropped 13% in morning trading, while VF Corp plunged 23%. 

Earlier this year, Duffy said companies have less room to raise prices compared to 2018, when the first Trump administration imposed tariffs. 

"We think it's a more difficult environment in which to pass along pricing, therefore more likely to be impactful to the margins of the apparel industry," Duffy told Yahoo Finance over the phone.

In a similar vein, KPMG US Consumer and Retail's Duleep Rodrigo said these tariffs complicate supply chains and force tough pricing and sourcing decisions.

"While large players may weather the storm, many will struggle to absorb rising costs, particularly in price-sensitive categories where margins are already tight," he said.  

Feldman said Trump's intention to move manufacturing back to the US would be nearly impossible for companies like Nike. 

"There's no textile mills in the US ... footwear mills. There's no apparel manufacturing mills," he said. "You can't do that overnight. It's going to take a year, a few years ... to get those up and running; the cost of that is significant." 

And shoppers will likely foot a part of the cost. 

"That's the whole point of global trade ... That you found cheaper places to make a lot of goods, to reduce prices for the US consumer. Well, if it costs more to make the goods here in the US, [it's] still going to cost the US consumer more," Feldman added. 

Already, consumer sentiment, released Friday from the University of Michigan, fell to its lowest level since November 2022.

Matt Priest, CEO of the Footwear Distributors and Retailers of America (FDRA), said in a release that the reciprocal tariffs are "catastrophic for American families" and will "drive-up costs, reduce product quality, and weaken consumer confidence." 

Brooke DiPalma is a reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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