Nike’s shares surged by nearly 18% last week, following the release of its fiscal fourth-quarter earnings report that exceeded market expectations.
Despite a challenging quarter marked by a 12% decline in revenue to $11.1 billion and an 86% plunge in net income, Nike’s results outperformed analyst forecasts. The company posted adjusted earnings per share of 14 cents, surpassing consensus estimates by 2 cents and marking its eighth consecutive quarter of earnings beating expectations. This performance helped restore investor confidence amid concerns over ongoing tariff pressures and inventory challenges.
Elliott Hill, who took over as CEO in October 2024, emphasised that Nike has moved past the most difficult phase of its turnaround. During the earnings call, Hill acknowledged that while the recent results “are not up to the Nike standard,” the initiatives under the “Win Now” programme are beginning to deliver results.
“From here, we expect our business results to improve. It’s time to turn the page,” he said.
Hill highlighted several key developments underpinning the company’s optimism. Nike has resumed selling on Amazon for the first time since 2019 to expand its digital footprint. The brand is also intensifying efforts to capture the female market, launching products in over 200 women-led retail outlets, including Aritzia, and debuting a collection with WNBA star A’ja Wilson, which reportedly sold out within minutes.
Additionally, Nike has revitalised partnerships with wholesale distributors and is investing heavily in sports-focused marketing to reinforce its leadership position.
However, Nike’s path to full recovery remains cautious. The company continues to grapple with excess inventory from classic lines such as Dunks and Jordans, necessitating deep discounting and clearance sales that have pressured profit margins.
Sales of these heritage models fell by over 20% in fiscal 2025, accelerating to a 30% decline in the fourth quarter, impacting revenues by nearly $1 billion. Inventory clearance efforts are expected to weigh on profitability through the first half of fiscal 2026, though Nike anticipates improvement in the latter half of the year.
Tariffs remain a challenge, with an estimated $1 billion in additional costs this fiscal year, primarily affecting manufacturing hubs in China and Vietnam. Nike is actively collaborating with suppliers and retailers to mitigate these impacts, but the tariff burden is expected to continue weighing on margins in the near term.
Geographically, Nike’s revenue declines were uneven. Sales in China dropped 21%, reflecting heavy discounting to manage inventory, while North American revenue fell 11%, with footwear and apparel sales declining 13% and 7% respectively. The EMEA region saw a 9% sales decrease, and Asia Pacific and Latin America markets both contracted by 8%.
The positive market reaction was further supported by several analyst upgrades. HSBC raised Nike’s rating from “hold” to “buy” for the first time in over three years and increased its price target to $80, indicating a potential 28% upside.
While Nike’s recent results and moves suggest the company is on a recovery trajectory aligned with Wall Street’s expectations, CEO Hill cautioned that a full turnaround will require patience. When asked about a timeline for returning to revenue growth, he replied, “Just because of everything that’s going on, we’re going to take it 90 days at a time. We believe full recovery will take time.”