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Nike is making big changes to deal with rising costs caused by new tariffs on Chinese goods.

On Thursday, the sportswear giant shared that it's expecting to spend an extra $1 billion in the 2026 fiscal year because of these added duties.

To handle this, Nike plans to raise prices, shift its supply chain, and work closely with factory and retail partners.

Nike's Chief Financial Officer Matt Friend called the new tariffs a "meaningful cost" during a call with analysts.

According to CNBC, He said the company will work to "fully mitigate" the impact by adjusting prices and reducing its reliance on factories in China.

Right now, about 16% of Nike's production is based in China. The company wants to cut that number to the high single digits by the end of the fiscal year, which ends next summer.

Even so, Friend said China is still a key player when it comes to their manufacturing.

The pricing changes come as Nike pushes through a challenging turnaround. In the three months ending May 31, Nike earned $211 million, down from $1.5 billion a year earlier.

Sales fell 12% to $11.1 billion, but that was actually better than what Wall Street predicted. After the earnings call, the company's shares jumped by around 10%.

Nike's Online Sales Fall 26% While In-Store Sales Rise 2%

Nike CEO Elliott Hill, who stepped in to lead a reset of the brand, admitted the results are not up to the company's usual standards. "From here, we expect our business results to improve," Hill told analysts.

The company saw a 14% drop in direct sales, and its online revenue took an even bigger hit, falling 26%, InvestingSnacks said. One bit of good news for Nike—sales at their physical stores went up by 2%.

Nike did better than expected in North America, bringing in $4.7 billion in revenue. However, sales in China dropped to $1.48 billion.

Nike is also returning to Amazon, offering a limited selection of shoes and apparel on the platform later this year. It's part of a larger plan to reconnect with more retailers and boost visibility.

At the same time, Nike is doubling down on sports performance and athlete partnerships. The company recently launched a sold-out sneaker collection with basketball star A'ja Wilson and plans to release more pairs in coming seasons.

As Nike works to stabilize its business and stay competitive with rivals like Lululemon and Alo Yoga, the company is choosing to evolve rather than pull back.