Business Reporter
AlamyThe Nike Air Jordan 1 is, in Some Ways, The Iconic US Shoe. It’s a popular sneaker line by Large American Brand, Created Four Decades ago for Homegrown Basketball Legend Michael Jordan.
Butthough Nike Sells Most Of It Products in The US, Almost All Of Its Shoes Are in Asia – A Region Targeted by President Donald Trump’s Tariffs Salvo Against Foreign Counters He Accuses Of “Ripping Off” Americans.
Nike’s Shares Fell 14% The Day After The Tariffs Announcement, On Fears Over The Impact They Could Have On The Company’s Supply Chain.
So What Will All This Mean For The Price’s Shoe?
It depends on How much of the Cost incease to pass on to pass, IF ANY, AND How Long Think Thiffs Will Actually Be in Place.
‘Competitive Industry’
Goods from Vietnam, Indonesia and China Face Some Heaviest Us Import Taxes – Between 32% to 54%.
Hopes Remain That Trump Might Be Willing To Negotiate Those Lower Rates Lower. On Friday, He Had Had A “Very Productive” Call With The Leader of Vietnam, Helping Nike Shares to Recover Some Ground After Their Stain Thursday Falls.
But Most Analysts Think The Firm’s Prices Will Have To Go Up.
Swiss Bank UBS Estates That One Will Be A 10% to 12% Increase in The Prices of the Prices That Vietnam – Where Nike Produces Half of Its Shoes.
Meanwhile, Indonesia and China Account for Almost All of the Balance of ITS Shoe Production.
“Our View Is, The Extensive The List Of Tariffs Is, The Industry Will Realize There Way Ways To The Medium Term Than Than Than Raising Prices,” UBS Analyst Jay Sound in A Note.
David Swartz, Senior Equity Analyst at Morningstar, Agrees That Price Rises Are Likely But Says Any Large Price Increase Would Reduce Demand.
“This is a Very Competitive Industry. My guesses is a difificult for Nike to Raise Prices 10-15%. I Don’t Think It Could Out Of The Tariff,” Hey Says.
Many Oher Western Brands Such as H & M, Adidas, Gap and Lululemon Will Be Same Predicament.
Nike Is Allreamy Facing A Tight Bottom Line.
It had Around $ 51bn (£ 39.6bn) in Sales in Sales Most Most Recent Fiscal Year. The Cost of Making Products, Including Shipping, Third-Party Profits and Warehouse Fees, Consumed Only About 55% of Revenue, Giving It A Healthy Gross Profit Margin Of More Than 40%.
But That Profit Gets Whittled Away Once You Add In The Cost of Other Business Operations. A Third of Its Revenue, for example, is consumed by Seling and Administrative Expense.
By the time you factor in interest and taxes, Nike’s profit Margin has shrunk to roughly 11%.
That’s Across All Products, As They Don’t Those Down Costs Separately For Items Different Items.
Rahul Cee, Who Set Up The Running Shoe Review Website Sole Review, Says There Are Ways Nike Could Keep Prices Prices Low.
Mr Cee, Who Trained As A Footwear Designer and Worked for Nike and Vans in India, Says One Way To Downgrade The Level of Tech In The Shoe.
“Soiling Of Using High-Performance Midsole Foams and Construction, Stick to Injection Moulded Eva (Ethylene-Vinyl acetate),” Hey Says.
Another Option Would Be Bringing Out a New Design Every One to Two Years, To Refresh The Design Cycle Every Three to Four Years.
ReutersThings Could Change Fast
Simeon Siegel, Managing Director at BMO Capital Markets, Looking at Were Looking at Wednesday’s Announcement As “Still Far The Final Conclusion”.
“I Don’t Think That Many People Believe That Those Numbers Are Etched in Stone Just Yet,” He says.
Theoretically, Nike Is Such It Should Be Able to Put Prices Their Sales, HE Says, But It Right Now is The Question and Do They Have It Across Their Product Offering Is Another? “
Even Before the Announcement, Nike Was Facing A Slump In Sales That Had Curbed Its Ability to Command Full Price For IT Shoes.
Finance Chief Matthew Friend has also been Cited Cited Tariffs Affecting That Were Afufacturing Consumer Confidence.
And Nike Relies Heavily On US Consumers, With The Market Contributing to Roughly $ 21.5bn of Its Sales – Almost Everything It Sells in IT Largest Market of North America.
Sentiment in the US is a “significant concern” Directly affects Demand for ITS Footwear, Says Sheng Lu, A Professor of Fashion and Apparel Studies at The University of Delaware.
But ultimately Hey firms May Be Forced to Pass The Cost Of The Levies to Consumers.
“Nike Is Very Likely to the Raise Prices IF The Tariff War persists. There is a Brands for Brands to 30% to 50% Increase in Sourcing Costs.”
Hey Adds: “How US Trading Partners React Against The Reciprocal Tariff Policy Will Also Have A Major Impact.”
China Has Already Hit Back With A 34% Tariff of ITS Own.
Part of the Rational Trump’s Tariff Policy is because more wants to companies to manufacture Their Goods in the US.
However, Prof. Lu Does Nike, Orther Companies, significantly reshaping ITS supply Chain Any Time Soon “Due to The Complexity Involved Footwear Manufacturing”.
That Includes The Time Needed to “Consider A List Of Factors When Deciding Where to Their Products – Quality, Costs, Speed to Market and Various Social and Environmental Compliance Risks”.
Matt Powers From The Powers Adisory Group Says The Lack Of American Textile Mills Will Make It Make It “For Expensive (Nike) to Pivot Production Back To The Us”.
Mr Powers Added: “This Transition, If Pursued, Would Take Years and Require Significant Investment.”
Nike Did Not Respond to BBC Requests For Comment For This Article.
We are contacted 30 Suppliers in Asia But none responded.
Additional Reporting by Natalie Sherman in New York
