Claiming Its First Corporate Casualties, Accenture And Nike Hit Hard Due To Tariff Hikes And Doge Cuts, But Trump’s Policies Could Shake Things Up Even More!
The Trump administration’s radical overhaul of the federal government and economic policy is bleeding into corporate numbers. Nike on Thursday warned that sales will drop by a double-digit percentage in its current quarter as the sneaker giant contends with new tariffs, sliding consumer confidence, and a slower-than-expected turnaround.
In a conference call with analysts, finance chief Matt Friend said Nike expects its sales decline in the fiscal fourth quarter, which is set to end in May, to be at the “low end” of the “mid-teens range.” It also anticipates its gross margin will fall between 4 and 5 percentage points as it ramps up efforts to liquidate excess inventory and stale styles that are no longer resonating with consumers, a process it expects to continue into fiscal 2026.
“We believe that the fourth quarter will reflect the largest impact from our … actions, and that the headwinds to revenue and gross margin will begin to moderate from there,” said Friend. “We are also navigating through several external factors that create uncertainty in the current operating environment, including geopolitical dynamics, new tariffs, volatile foreign exchange rates and tax regulations, as well as the impact of this uncertainty and other macro factors on consumer confidence.”
The guidance is far worse than analysts had expected. Consensus estimates from LSEG show Wall Street had expected sales to be down 11.4% in the current quarter.
Shares fell more than 4% in extended trading and are down more than 5% year to date, as of Thursday’s close. Beyond guidance, Nike beat Wall Street’s expectations in its fiscal third quarter.
The company’s reported net income for the three-month period that ended Feb. 28 was $794 million, or 54 cents per share, compared with $1.17 billion, or 77 cents per share, a year earlier.
Sales dropped to $11.27 billion, down about 9% from $12.4 billion a year earlier. Like other retailers, Nike saw strong demand in December followed by “double-digit” declines in January and February.
While Nike delivered a strong earnings beat, expectations were low headed into the release and profits fell 32% from the year-ago period.
During the quarter, Nike’s gross margin fell by 3.3 percentage points to 41.5%, lower than expectations of 41.8%, according to StreetAccount. That’s largely because of the costs associated with Nike’s efforts to clear out old inventory in favor of new, innovative styles. In a press release, the company attributed its drop in gross margin to “higher discounts, higher inventory obsolescence reserves, higher product costs and changes in channel mix.”
Meanwhile, sales were down 9%, driven by weakness in China. During the quarter, sales fell 17% in the key region to $1.73 billion, falling short of expectations of $1.84 billion, according to StreetAccount.
Thursday’s release comes about five months into Elliott Hill’s tenure as CEO and his efforts to turn around the business and get it back to growth. He has focused on winning back wholesale partners, reigniting innovation, and wooing back athletes that have fled to new competitors, but the work has not yet yielded results.
During the quarter, sales on Nike’s direct channels dropped 12% to $4.7 billion. Wholesale revenue fell 7% to $6.2 billion.
Plus, since Hill took over, the company is now contending with a new set of dynamics that could make its comeback even harder to execute.
In the three months since Nike last reported earnings, President Donald Trump has put a new 20% tariff on goods imported from China, consumer sentiment has fallen, and retail sales in both January and February were weaker than expected.
Out of the hundreds of suppliers and manufacturers that Nike works with, about 24% of them are located in China, according to a manufacturing disclosure published in January. If the retailer doesn’t raise prices to offset tariffs and can’t push the cost entirely onto suppliers, Nike’s margins are expected to take a hit from the new duties. On Thursday’s call, Nike didn’t say whether it would raise prices or how exactly the new duties would affect margins.
Consumer Spending Pains
Further, when consumers aren’t feeling confident and cutting back on spending, discretionary products like new clothes and shoes are one of the first things they cut out in favor of necessities. Over the last few years, the overall sneaker and apparel markets have been slow because consumers have cut back on clothes and shoes. But up until recently, strong companies were still performing well and taking market share from weaker competitors.
However, that trend began to shift over the last few weeks when even the strongest of companies started to sound the alarm about soft consumer spending when they reported first-quarter earnings, raising questions about the health of the economy.
During the quarter, sales in North America, Nike’s largest market, fell 4% to $4.86 billion. Still, revenue in the region came in better than the $4.53 billion analysts had expected, according to StreetAccount.
Nike is widely expected to reclaim the market share it lost and reset its business, and some insiders say the company’s problems have been overblown. Even so, the tariffs and economic fears could mean that the retailer’s turnaround could take longer, and be more difficult, than expected.
What’s The Plan
What’s key to Nike’s turnaround plan is its ability to reignite innovation and create the type of industry-leading shoes and apparel that have long made it the market leader. During a call with analysts, Hill said early releases for the company’s new Pegasus Premium “nearly sold out” across North America and will scale through fall 2025. Its Romero 18, created for the everyday runner, has seen “outstanding” results, and Nike plans to double distribution by mid-April.
“It will take time to reach the volume to replace the handful of classic franchises we over-indexed on, but our approach is simple,” said Hill. “Help consumers fall in love with something new from Nike, and that something is not replacing one icon for another.”
Nike has already made strides in its efforts to grow its female consumer base, another key component to boosting revenue and apparel sales. Last month, it announced it was teaming up with Kim Kardashian’s intimates brand Skims to create a new product line dubbed NikeSKIMS that will include apparel, footwear, and accessories. The buzzy partnership is expected to give Nike improved inroads with women and allow it to better compete with Lululemon, Alo Yoga, and Vuori, which cater more to women than Nike currently does.
Further, Nike debuted a new ad campaign geared toward female athletes during the Super Bowl, its first big game advertisement in decades. The campaign showed that reaching female athletes and capturing the buzz around women’s sports will be a center point of Hill’s strategy.
If Nike can continue to show positive signs from new product launches and partnerships, it might just work out for the sneaker giant.
Accenture Takes a Hit as Federal Spending Tightens
Meanwhile, Accenture’s stock took a nosedive on Thursday, sliding 7.3% after the company admitted that the U.S. government’s belt-tightening is starting to hurt its revenue. CEO Julie Spellman Sweet confirmed during the fiscal Q2 earnings call that the firm has already lost federal contracts due to ongoing government reviews.
Federal Spending Cuts Take a Toll
Federal contracts account for about 8% of Accenture’s global revenue and a significant 16% of its Americas revenue for FY 2024. But with the new administration pushing for a more efficient government, new procurement actions have slowed, directly impacting Accenture’s sales and revenue.
Adding to the pressure, the U.S. General Services Administration has directed federal agencies to reassess contracts with the top 10 highest-paid consulting firms. Any contracts deemed non-essential are on the chopping block. While Accenture argues that its work remains “mission-critical,” Sweet acknowledged the uncertainty surrounding government spending priorities.
Stock Tanks Despite Beating Expectations
Even though Accenture managed to beat earnings estimates, reporting $2.82 per share on revenue of $16.66 billion versus expectations of $2.81 per share on $16.62 billion, the market wasn’t impressed. Investors are more worried about the impact of slowing government contracts, causing the stock to plummet nearly 23% in the past month and 14.5% year-to-date.
Trump’s Policies Could Shake Things Up Even More
If there’s one thing that’s certain about Donald Trump’s policies, it’s that they have left nothing untouched, whether it’s global trade, corporate strategy, or geopolitical alliances, his economic shake-ups have sent tremors far and wide.
Global Fallout
From trade wars to tariffs, Trump’s economic policies have forced nations to rethink their strategies. The biggest shock came with his aggressive stance on China, hiking tariffs on imports, cracking down on Chinese tech firms, and triggering a retaliatory response that could likely send ripples through global supply chains. Countries dependent on trade with the U.S. have found themselves stuck in a precarious situation, with many scrambling to negotiate exemptions or forge alternative trade deals.
European nations haven’t had it easy either. Trump’s threats to slap tariffs on EU goods and his push for NATO allies to increase defense spending created tensions, forcing European leaders to rethink their economic and military alliances.
Meanwhile, India, which once enjoyed favorable trade terms, is seeing key benefits stripped away as the Trump administration recalibrated its approach to trade partnerships.
Corporate Chaos
For corporations, Trump’s policies may prove even tougher. The long-term impact of tariffs, regulatory rollbacks, and protectionist policies may created instability as already seen in the case of Nike and Accenture.
Tech firms, too, have been caught in the storm. The Trump administration’s scrutiny of foreign talent through H-1B visa restrictions could have a crippling effect on many Silicon Valley giants – struggle to fill high-skill roles. Meanwhile, manufacturing firms once promised a “Made in America” revival have found supply chain disruptions and increased material costs making domestic production less feasible than ever.
The Last Bit
Economic uncertainty seems to be on the horizon, as companies and countries alike are still figuring out how to absorb the aftershocks of Trump’s policies. From global trade realignments, corporate restructuring, and a shift in diplomatic relations, Trump’s policy upheaval has left a lasting mark, and the full impact is still unfolding.
