The Great Reconfiguration: How Nike's Shift from China is Reshaping European Sportswear Valuations

The global sportswear industry is undergoing a seismic shift as Nike's decision to reduce its reliance on Chinese manufacturing—driven by escalating U.S. tariffs—has set off a chain reaction across the sector. This strategic pivot is not just about tariffs; it's a reordering of supply chains, cost structures, and investor expectations that could redefine valuations for European peers like Adidas, Puma, and JD Sports. For investors, the question is clear: How should they position themselves in this new era of supply chain resilience?

Nike's Crossroads: Tariffs, Inventory, and Innovation

Nike's fiscal 2025 results underscore the challenges of its China exit. While tariffs on Chinese-made goods now hit 30%, the company aims to slash U.S. imports from China to “high single digits” by 2026, relocating production to Vietnam, Indonesia, and the Philippines. This move, however, has exposed vulnerabilities: $7.5 billion in excess inventory, a 12% revenue decline in its latest quarter, and margin pressures from discounts and clearance sales.

Yet, Nike's strategy is also a masterclass in long-term thinking. By prioritizing performance shoes (e.g., the Pegasus and Vomero) over overstocked lifestyle models like the Air Force 1, the brand is rebalancing its product mix to command higher margins. reveal a path to stabilization, though short-term pain persists.

The Ripple Effect: How European Brands Are Playing Catch-Up

Nike's moves signal a broader industry reset. Competitors must now adapt or risk falling behind in a landscape where supply chain agility and cost discipline are paramount. Let's examine the ripple effects through three key players:

Adidas: Inventory Overhaul and Regional Customization

Adidas has embraced Nike's playbook with vigor. Despite a 12% revenue surge in 2024, its inventory grew 10% to €5.0 billion—a deliberate overstock to fuel 2025's projected high-single-digit sales growth. Crucially, Adidas is leaning into localized product design, such as its Tokyo/Japan franchises and region-specific collections like the Climacool. This strategy is paying off: North American footwear sales jumped 17%, while operating profit hit €1.3 billion.

Adidas's stock, however, remains undervalued relative to its growth potential. With a P/E of ~20x (below Nike's 25x) and a 2025 operating profit target of €1.7–1.8 billion, the stock could rebound if inventory turnover improves. shows synchronicity in volatility, suggesting investors may be underestimating its execution.

Puma: Speed, Cost Cuts, and the Southeast Asia Play

Puma's shift is more aggressive. It slashed Chinese footwear production for U.S. markets from 28% to 10%, relocating to Vietnam (26%) and Cambodia (16%). This has allowed it to avoid the 46% tariff on Vietnamese goods—a move that could save hundreds of millions annually.

Despite a 43% YTD stock decline, Puma's Q1 2025 sales held steady at €2.08 billion, driven by 12% growth in direct-to-consumer sales. Cost-cutting—500 jobs eliminated by Q2—adds further resilience. highlight its proactive stockpiling to pre-empt tariffs, a bet that could pay off if demand stabilizes.

JD Sports: The Retail Rebalancing Act

JD Sports, the UK-based retailer, is reconfiguring its supply chain to match Nike and Adidas's shifts. With $1.4 billion spent on acquisitions like Hibbett (U.S.) and Courir (Europe), it now operates 4,850 stores globally. Its multibrand distribution centers in the U.S. and Europe are critical to reducing reliance on China and streamlining logistics.

While JD's FY25 operating cashflow rose 7.2% to £1.2 billion, its focus on store rationalization and franchise models in emerging markets (e.g., Indonesia) positions it to capitalize on regional growth. underscores its geographic diversification, a key hedge against China-centric risks.

The Investment Case: Valuations vs. Execution

The sector's valuation reset is incomplete. Nike trades at a premium due to its brand dominance, but its P/E of 25x is still within historical norms. Adidas and Puma, however, trade at discounts despite their strategic moves. For example:

• Adidas: A P/E of 20x and a dividend yield of 1.5% offer value if margins stabilize.
• Puma: A P/E of 18x and a 0.5% dividend yield present a high-risk, high-reward bet on execution.
• JD Sports: A P/E of 16x and a 2.0% dividend yield reflect concerns over inventory and integration, but its cash flow resilience suggests upside.

Risks and Opportunities Ahead

The path is fraught with risks: geopolitical tensions, labor cost inflation in new production hubs, and the possibility of margin erosion as brands raise prices. Yet, the long-term narrative is clear: diversification into lower-tariff regions, inventory discipline, and product innovation will reward investors who act now.

illustrates the inverse relationship between tariff hikes and investor sentiment—a gap primed for closure as companies prove their supply chain agility.

Final Take: Buy the Dip, But Watch the Margins

Investors should consider selective buys in Adidas and JD Sports at current valuations, given their execution momentum and balance sheets. Puma's stock offers a speculative play for those willing to bet on its cost cuts and Southeast Asia pivot. Nike, while a core holding, may require patience as it works through inventory overhangs.

The sportswear sector's valuation reset is far from over. Those who align with the companies best positioned to navigate this reconfiguration will be rewarded as fundamentals catch up to investor optimism.

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