As retailers navigate the impact of U.S. President Donald Trump’s tariffs, a research analyst expects the price of goods to increase and costs to be passed on to consumers, as companies already face challenges of their own.
Trump recently announced a 20 per cent tariff on most Vietnamese exports and a 40 per cent levy on any trans-shipments from third countries. Major U.S. apparel and sportswear makers including Nike, Adidas and Under Armour had shifted factory production to Vietnam after Trump imposed tariffs on China in his first term.
“If you’re a footwear lover out there, do not wait to buy shoes,” Rick Patel, senior research analyst at Raymond James, to BNN Bloomberg Monday. “I think the prices are likely to go up in the coming months as these companies try to navigate these higher costs.”
Patel said Nike sales are declining as the company moves away from its classic assortments of products, such as Air Jordans, Nike Dunks and Air Force 1s, that were popular during the COVID-19 pandemic, towards performance items geared to athletes.
“The company’s revenue is in decline as they navigate this shift,” said Patel. “I would also add that China is a big component of Nike’s business, about 15 per cent of its revenue, and China is also declining double digits right now. So, it’s a work in progress story from a fundamental point of view on the demand side of things, and then add to that this tariff headwind, which the company sized at about US$1 billion”.
The U.S. is Vietnam’s largest export market, according to Reuters. Since 2018, Vietnam’s exports are up nearly threefold from less than $50 billion that year to about $137 billion in 2024, U.S. Census Bureau data shows. U.S. exports to Vietnam are up only about 30 per cent in that time to just over $13 billion last year from less than $10 billion in 2018.
Patel said every company is reacting the same way, working with manufacturers and wholesale partners trying to absorb costs and pass on higher price increases to consumers. He does however like upstart footwear brands such as On Holding and Decker, owner of Hoka, noting they have room to grow and take shelf space from Nike.
“We think both of these brands are very early life cycle lifestyle brands with a multi-billion-dollar runway for growth,” said Patel. “And both of these companies generate about two and a half billion of revenue, so they’re much smaller brands that we think can grow into a much larger brand over time, and that’s why we like them.”
Nike recorded its worst sales drop in five years in the fourth quarter, falling 12 per cent to $11.10 billion, but beat estimates for a 14.9 per cent fall.
