Nike (NKE) stock surged more than 9% in premarket trading on Friday after the company reported that its profit and sales declines are expected to narrow in the current quarter.
The sneaker giant also revealed that tariff-related costs are projected to reach nearly $1 billion, News.Az reports, citing foreign media.
Investors responded positively to Nike’s quarterly earnings update released late Thursday, driving the sharp rise in shares.
Nike expects sales to be down by mid-single digits in the current quarter, following a 12% drop in revenue during its fiscal fourth quarter ended May 31,
Gross margins, which fell by 440 basis points, or 4.4%, in its fourth quarter, are forecast to fall by 350-425 basis points in the current quarter.
On its conference call with investors late Thursday, Nike CFO Matthew Friend said newly implemented US tariffs "represent a new and meaningful cost headwind." Nike expects a 100 basis point negative impact on its gross margins as a result of tariffs.
Friend added the company sees a "gross incremental cost increase to Nike of approximately $1 billion," adding, "We intend to fully mitigate the impact of these headwinds over time."
On Thursday, Nike said it plans to cut its reliance on China for manufacturing the goods it sells in the US, as part of this strategy. Chinese suppliers currently account for about 16% of the shoes it imports into the US, per Reuters.
Nike has grappled with the sweeping tariffs announced by President Trump, with those impacts still uncertain given its global operational footprint and exposure both to China and Vietnam.
For its fiscal fourth quarter, ended May 31, Nike reported revenue of $11.1 billion, a 12% decline that was lower than Wall Street forecasts for a nearly 15% decline to $10.72 billion, according to Bloomberg data. Adjusted earnings per share tallied $0.14, compared to the forecast $0.13 per share. That was far lower than the $1.01 per share in earnings it reported in the same quarter last year.
Same-store sales at Nike-owned stores ticked higher, rising 2% compared to the 2.6% decline analysts anticipated.
"While our financial results are in line with our expectations, they are not where we want them to be. Moving forward, we expect our business to improve as a result of the progress we're making," CEO Elliott Hill said in the release.
Alongside the tariffs headwinds, Nike is also facing deteriorating consumer confidence as it aims to get customers back in stores and competes with rivals like On (ONON) and Hoka (DECK).
