While adjusted earnings and revenue exceeded Wall Street expectations, growth remained under pressure. Management also warned that weak consumer demand and challenging market conditions are likely to continue through at least the first half of fiscal 2027.
Nike Stock Tumbles
Nike stock fell in pre-market trading on Wednesday after investors looked past the company's headline earnings beat and focused on sales weakness, particularly in China. Shares were down by more than 1% before the opening bell as the market reacted to signs that Nike's turnaround is progressing more slowly than many had hoped.
Nike stock price over the past day (Source: Google Finance)
Nike reported fiscal fourth-quarter earnings of $0.72 per diluted share, but the result was heavily boosted by a one-time $0.52 per-share benefit tied to the expected recovery of import tariffs. Excluding that benefit, the company earned $0.20 per share, beating Wall Street expectations of $0.12. Revenue also exceeded analyst estimates, and came in at $10.97 billion, although sales still declined from a year earlier.
The largest contributor to the earnings boost was a $986 million expected refund of duties collected under the International Emergency Economic Powers Act. The one-off gain lifted Nike's gross margin by roughly 900 basis points to 49.2%.
China was Nike's biggest challenge during the quarter. Revenue in Greater China fell 17% on a constant-currency basis, which worsened the previous quarter's 10% decline, while reported sales dropped 12%. The company said domestic competitors are gaining market share as Chinese consumers shift away from international brands.
Greater China accounts for roughly 15% of Nike's annual revenue, which makes the region a key driver of the company's long-term performance.
North America provided some encouragement with revenue increasing 3%, while wholesale revenue rose 4% to $6.6 billion. However, Nike Direct revenue declined 7% to $4.1 billion as digital sales fell 12% and sales at Nike-owned stores dropped 7%. Converse also continued to struggle, with revenue plunging 32% to $244 million.
For the full fiscal year ended May 31, 2026, Nike reported revenue of $46.4 billion, which was flat on a reported basis and down 2% on a currency-neutral basis. Net income declined 3% to $3.1 billion, while diluted earnings per share came in at $2.10.
Despite beating earnings expectations, investors are concerned about the company's outlook. CEO Elliott Hill acknowledged that Nike faces revenue headwinds, and outgoing Chief Financial Officer Matthew Friend warned that challenging market conditions and weak consumer demand are expected to persist through at least the first half of fiscal 2027.
