NKE
🏭 Nike’s heavy reliance on manufacturing in countries like Vietnam (130,000 workers) makes it highly vulnerable to the proposed tariffs, potentially adding costs greater than the tariffs themselves if forced to relocate.
💸 The analysis suggests tariffs could wipe out Nike’s entire profit margin, as a 24% tariff on its $28 billion cost of goods ($6.7 billion impact) exceeds its typical net income, forcing significant price hikes.
📉 Despite potential negotiations (like Vietnam offering zero tariffs, causing a brief stock rebound), the fundamental challenge of absorbing or passing on massive cost increases remains a significant headwind for the company.
@Artedeinvertir:
“Nike, for example, will never build factories in the United States to make sneakers; the American administration knows this. That’s why, again, the goal isn’t to bring factories to the United States. Nike will never build factories in the United States to make sneakers; that would add a cost greater than the 40% tariffs they’re going to impose. Nike has almost 130,000 workers in Vietnam. Nike, a few years ago, relocated from China due to the risk of conflicts with China and moved to Vietnam, where it has dozens of factories and hundreds of thousands of subcontracted workers. Furthermore, Nike needs to maintain competitiveness by selling to customers in other countries that won’t impose tariffs. As a result, fewer sneakers will be sold in the United States at much higher prices because, even having to pay the tariffs, manufacturing for Nike is infinitely cheaper and more economical than bringing production back to the United States. This happens with most items or products that were initially outsourced to other countries. If we look at Nike’s accounts in the last year, Nike sells or has sales of 51 billion and product costs, which are mainly the sneakers or clothing manufactured in Asia, where the majority is, of 28 billion. If these 28 billion increase by a 24% tariff, we are talking about a cost increase of about 6 billion. These 6 billion are a problem because, notice, the tariff eats up all of Nike’s profit. That’s why it’s understandable that it dropped so much; it almost reached $50 until the news about Vietnam came out, and you see how everything changed in a moment. Still, Nike has other problems it was dragging from before, mind you, and I’m not recommending Nike or anything, but it’s a good example to understand why people panicked, because the tariffs would eat up all the profit. Now, what would Nike have to do? Well, if it invoices 51 billion, it would have to raise prices by 6 billion, by 12%. So the price of the sneaker wouldn’t rise that much either; the typical $100 sneaker would become $112. And note, Nike doesn’t sell everything in the United States; we then have to see what percentage is the United States, which in Nike’s case is 50% of what it sells there. In other regions, it doesn’t benefit it; sorry, it doesn’t harm it; it could even benefit it.”
Watch the exact part of the video where Arte de Invertir talks about Nike here:
Watch the video on YouTube
Read more articles analyzing Nike (NKE) at the following link. NKE stock.
