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Nike, Adidas and Lululemon may raise prices to offset tariff costs
On April 9, various media outlets reported that starting April 8, shoe and apparel retailers across the United States began delaying orders and halting hiring to cope with the tariffs imposed on imported products by the U.S. on April 9. Companies like Nike, Adidas, and Lululemon are facing a tough choice: either raise prices by about 40% to offset tariff costs, potentially leading to a drop in sales, or absorb the increased costs, further squeezing already thin profit margins. However, unlike larger competitors, small and medium-sized clothing and footwear manufacturers do not have extensive supply chains. For example, the backpack manufacturer Day Owl is headquartered in New York City, but its production line is located in Vietnam (which faces a 46% tariff). Day Owl CEO Ian Rosenberger stated that the company has suspended future orders. He estimated that unless an agreement is reached with Vietnam to significantly reduce tariffs, Day Owl will end transactions within 30 days. However, with a production cycle of about 100 days, a long wait could mean missing the critical back-to-school shopping season. Many of the company's employees are also concerned about the risk of losing their jobs. CEO Rosenberger added that the tariffs would increase the company's tax bill from $5 to $22, forcing Day Owl to raise the price of its premium backpacks from $155 to $212. Meanwhile, according to calculations by the American Apparel and Footwear Association (which includes Nike, Walmart, Skechers, and Deckers), a pair of running shoes produced in Vietnam that sells for $155 will have to be priced at $220 in U.S. stores to offset the 46% reciprocal tax announced by President Donald Trump on goods entering the U.S. market from Vietnam. Vietnam has developed specialized factories producing various products, from high-tech running shoes to sports apparel. It is the second-largest source of U.S. apparel and footwear imports, after China, and is a key manufacturing hub for brands like Nike and Adidas. Vietnam has requested a 45-day delay in the implementation of the tariffs and has indicated it will increase purchases of U.S. goods. Previously, Trump had agreed last Friday with Vietnamese leader Nguyen Xuan Phuc to discuss a deal to remove the tariffs. Since Trump announced the tariffs on April 2, Nike's stock has fallen by 14%, Adidas' shares dropped by 16%, Puma's stock decreased by 18%, and the parent company of The North Face, VF Corp, saw its stock plummet by 31%. These large companies work with factories around the globe, giving them some negotiating power to share the tariff costs with suppliers. A spokesperson for VF Corp stated, "Our supply chain is highly diversified and can adapt to tariffs." In contrast, smaller companies, like the women's running brand Oiselle based in Seattle, Washington, have a weaker capacity to absorb costs and lack the resources to develop alternatives. Oiselle's CEO, Arielle Knutson, has requested that the company's 14 full-time employees create two to three tariff contingency plans while managing their daily work. Oiselle sources leggings, sports bras, and running tops from Vietnam and has currently delayed its previously scheduled orders for Spring 2026.
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