Nike Inc. (NKE) Stock: Rallies 10% as Turnaround Story Gains Traction

TLDR

Table of Contents

Nike’s Q4 revenue fell 12% to $11.1 billion but beat analyst expectations of $10.7 billion
Stock surged 9.7% in premarket trading after company forecasted smaller declines ahead
Tariffs expected to cost Nike approximately $1 billion this fiscal year, impacting gross margins
CEO Elliott Hill’s turnaround strategy includes clearing inventory and rebuilding wholesale partnerships
Company plans to reduce China footwear imports from 16% to high-single digits by fiscal 2026

Nike posted disappointing fourth-quarter results but managed to surprise investors with better-than-expected guidance. The sports giant’s stock jumped nearly 10% in premarket trading Friday.

The company reported revenue of $11.1 billion for the quarter ended May 31. This represented a 12% decline from the previous year. However, the figure exceeded Wall Street expectations of $10.7 billion.

Earnings came in at 14 cents per share, slightly ahead of the 13-cent analyst consensus. This marked a sharp drop from $1.01 per share in the same quarter last year.

$NKE | Nike is -1.0% after-hours.
🔹 EPS: $0.14 vs. $0.13 est. ✅
🔹 Revenue: $11.10B vs. $10.73B est. ✅
Key takeaways:
🔸 Nike Brand revenue: -10% YoY
🔸 Nike Direct revenue: -14% YoY
🔸 Nike digital revenue: -26% YoY
🔸 Greater China revenue: -21% YoY
🔸 Inventory: flat YoY pic.twitter.com/M5QauuLZNE
— CMG Venture Group (@CmgVenture) June 26, 2025

The earnings contraction reflects Nike’s strategy of heavily discounting products to clear inventory. This approach is part of CEO Elliott Hill’s broader turnaround plan for the struggling sneaker maker.

Nike has been losing market share to newer performance-focused brands like On Holding and Hoka. The company previously severed ties with wholesale partners under former CEO John Donahoe.

Tariff Impact Creates New Challenges

The biggest headwind facing Nike is the impact of new tariffs. CFO Matthew Friend described the levies as “a new and meaningful cost headwind” for the business.

Nike expects tariffs to increase operating costs by approximately $1 billion this fiscal year. This will reduce gross margins by about three-quarters of a percentage point over the year.

The company currently imports 16% of its footwear from China. Nike plans to reduce this to the high-single digit range by the end of fiscal 2026.

The worst tariff impact will hit in the first half of the year. Nike intends to offset costs by shifting production and raising prices for US consumers starting this fall.

Chinese suppliers have been a key part of Nike’s manufacturing base for years. The company has been diversifying since Trump’s first presidential term.

In 2024, Nike produced 18% of its apparel and 16% of footwear in China. This compares to 26% and 29% respectively in 2016.

Recovery Signs Emerge Despite Challenges

Nike’s first-quarter guidance provided the catalyst for Friday’s stock surge. The company expects revenue to decline by mid-single digits year-over-year.

This represents a meaningful improvement from the fourth quarter’s 12% drop. Analysts had been forecasting a 7% decline for the current quarter.

Gross margins are expected to contract by 3.5 to 4.25 percentage points in Q1. This includes one percentage point from tariff costs.

The margin decline is still an improvement from Q4’s 4.4 percentage point decrease. Hill acknowledged the results aren’t where the company wants them to be.

Same-store sales at Nike-owned stores rose 2% in Q4. This beat analyst expectations for a 2.6% decline.

Hill noted that demand for Nike’s performance products like running shoes was improving. Wholesalers are also placing more orders ahead of the holiday season.

The company is rebuilding relationships with wholesale partners it previously abandoned. New partnerships include Amazon.com and renewed ties with Dick’s Sporting Goods and Macy’s.

Nike’s China business remains particularly weak with revenue falling 20% in Q4. Equipment sales dropped 33% while footwear and apparel declined 20% and 19% respectively.

Wholesale revenue totaled $6.4 billion for the quarter, down 9% from a year ago. The company is working to rebalance its direct-to-consumer focus with wholesale partnerships.

Nike plans to launch new products including the Vomero 18, Jordan Retros, and a collaboration with Kim Kardashian. These innovations are expected to help drive future growth.

Jefferies analyst Randal Konik remains optimistic about Nike’s recovery prospects. He expects a “V-shaped recovery” in fiscal 2027 as competitive pressures ease.

Nike stock has fallen more than 34% over the past year but rebounded from April lows. The company traded at $68.58 in Friday premarket sessions after closing Thursday at $62.54.

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