Revenue beat fails to offset cautious outlook
Nike (NYSE:NKE) acknowledged that its turnaround remains a work in progress after ongoing weakness in China and a subdued outlook overshadowed a modest fourth-quarter revenue beat.
The sportswear group reported a 1% decline in quarterly revenue, while sales in Greater China fell by double digits, leaving investors unconvinced that Chief Executive Elliott Hill’s strategy is yet delivering a sustained recovery.
Nike also warned that revenue is expected to decline further during the first half of fiscal 2027 as the company continues to contend with intense competition and elevated inventory levels.
CEO says recovery remains uneven
Speaking on the post-results earnings call, Hill admitted the transformation is taking longer than hoped.
“Overall, the results aren’t there yet,” he said. “We know we’re not living up to our full potential.”
Nike shares have fallen around 35% since the start of the year. The stock dropped roughly 4% in after-hours trading following the results before recovering part of those losses.
Hill, who became CEO in 2024, said Nike’s strategy of refocusing on sport, rebuilding wholesale partnerships and expanding its product offering is progressing, but acknowledged that the recovery “continues to be uneven.”
The company plans to introduce more than a dozen new footwear models, although Hill cautioned that it will take time before the expanded product pipeline delivers consistent results.
Consumers remain under pressure
“Our consumer is under pressure around the world, and we can particularly see it having a larger impact on sportswear,” outgoing Chief Financial Officer Matthew Friend said.
Friend added that trading conditions became more challenging during the fourth quarter and are unlikely to improve over the next six months, with tariffs continuing to weigh on costs.
Nike’s recovery has also been complicated by geopolitical uncertainty, cautious consumer spending and efforts to clear older lifestyle-focused inventory, all of which have pressured margins.
Morningstar analyst David Swartz said: “Expectations were low and Nike had a sales decline, so these are still not good results.”
China remains the biggest challenge
Greater China continued to be Nike’s weakest-performing region, with fourth-quarter sales falling 17% on a constant-currency basis, compared with a 10% decline in the previous quarter.
Although the result was slightly better than the company’s earlier forecast for a 20% decline, Nike continues to lose market share to domestic competitors including Anta and Li Ning, while weak product ranges have weighed on demand.
Friend said sales trends in China are expected to remain broadly consistent with recent declines as Nike works alongside retail partners to reduce excess inventory.
Greater China accounts for roughly 15% of Nike’s annual revenue and remains the company’s third-largest market after North America and Europe, the Middle East and Africa.
North America provides some encouragement
Despite ongoing challenges, Nike highlighted early signs of improvement.
The company has increased marketing around this year’s World Cup and accelerated new product launches in an effort to compete more effectively with rivals such as Adidas.
Nike said demand for its football products has begun to recover after slowing in April and forecast a slightly positive gross margin for the first quarter.
North American revenue, Nike’s largest business, increased 3% during the fourth quarter, supported by stronger wholesale sales as the company rebuilt relationships with retail partners that had been scaled back under former CEO John Donahoe’s direct-to-consumer strategy.
Earnings beat supported by tariff recovery
Nike reported earnings per share of 72 cents for the quarter, benefiting from a 52-cent gain linked to the expected recovery of import tariffs.
The company recognised a $986 million benefit from tariff refunds during the three months ended 31 May. Last October, Nike had estimated tariffs would cost the business approximately $1.5 billion overall.
On an adjusted basis, quarterly earnings came in at 20 cents per share, comfortably ahead of analysts’ expectations of 13 cents, according to LSEG.