Nike Q4 2025 Earnings Report

Introduction to Nike’s Financial Performance

Nike on Thursday said it expects sales and profit declines to moderate ahead, after the sneaker giant took its biggest financial hit yet from its turnaround plan during its fiscal fourth quarter.

Challenges Ahead

While the worst could be behind the company, it has new challenges like tariffs to face, making a tough turnaround that much more difficult. On a call with analysts, finance chief Matt Friend called the duties a "new and meaningful" cost. "With the new tariff rates in place today, we estimate a gross incremental cost increase to Nike of approximately $1 billion" in its current fiscal year 2026, Friend said.

Mitigating Tariff Costs

He added that the company intends to "fully mitigate" that cost over time as it tweaks its supply chain, works with its factory and retail partners and implements price increases. Currently, about 16% of its supply chain is in China and it expects to reduce that to the high single digit percentage range by the end of its current fiscal year, which is expected to end next summer.

Supply Chain Importance

"Despite the current elevated tariffs for Chinese products imported into the United States, manufacturing capacity and capability in China remains important to our global source base," said Friend. Friend said the company will consider cost cuts but its highest priority remains stabilizing its business, which requires investment.

Financial Impact

Once those efforts are implemented, Friend said the financial impact to fiscal 2026 gross margin is expected to be 0.75 percentage points, with a greater impact expected in the first half. While Wall Street’s expectations were low coming into the report, Nike beat estimates on the top and bottom lines.

Quarterly Performance

Here’s how the company did for the three-month period ended May 31, compared with estimates from analysts polled by LSEG:

• Earnings per share: 14 cents per share vs. 13 cents estimated
• Revenue: $11.10 billion vs. $10.72 billion estimated

Net Income and Sales

The company’s reported net income for the quarter was $211 million, or 14 cents per share, compared with $1.5 billion, or 99 cents per share, a year earlier. Sales dropped to $11.10 billion, down about 12% from $12.61 billion a year earlier.

Turnaround Progress

Last quarter, Nike warned that its fiscal fourth quarter would be the low point of its turnaround but in the months since, conditions worsened, leaving investors wondering if more pain was still to come. In a press release, Friend confirmed that the fiscal fourth quarter will see the "largest financial impact" from its turnaround and headwinds are expected to moderate moving forward.

CEO’s Perspective

On a call with analysts, CEO Elliott Hill said it’s time to "turn the page." "The results we’re reporting today in Q4 and in FY25 are not up to the Nike standard, but as we said 90 days ago, the work we’re doing to reposition the business through our ‘Win Now’ actions is having an impact," said Hill. "From here, we expect our business results to improve."

Future Expectations

For the current quarter, Nike expects sales to decline by a mid-single digit percentage, in line with expectations of down 7%, according to LSEG. It expects its gross margin to be down between 3.5 and 4.25 percentage points, including 1 percentage point from the tariff rates currently in place today.

Share Performance

Nike shares initially dropped after its report was released but moved about 10% higher during the company’s conference call.

Business Segments

During the quarter, Nike’s profits fell by a staggering 86% as it worked to clear out stale inventory, woo back wholesale partners and reset its digital business. The largest hit to margins came from Nike’s use of discounts and clearance channels to offload inventory, coupled with its shift back to wholesale, which is a less profitable channel than selling directly on its website and stores.

Digital and Wholesale Performance

Nike Direct revenue, representing stores, wholesale and its website, fell 14%, led by a 26% drop in digital sales and a 9% decline in wholesale. Nike stores, however, were a bright spot. During the quarter, sales at Nike stores rose 2%.

Regional Performance

Revenue fell in all regions during the quarter, but came in a bit better than expected in North America, Nike’s largest market. Sales fell 11% to $4.70 billion in North America, better than the $4.42 billion analysts had expected, according to StreetAccount.

China Market

China revenue came in at $1.48 billion, just below the $1.50 billion analysts had expected, according to StreetAccount. Hill told analysts that the sales recovery in China will take longer "due to the unique characteristics of the marketplace."

Strategic Changes

Since Hill took over as Nike’s CEO in October, a lot of his work has focused on unwinding the strategy his predecessor John Donahoe implemented. He’s worked to win back wholesale partners, after Donahoe pursued a direct selling strategy, and he’s also bringing Nike back to its sports focus.

Product Focus

Under Donahoe, Nike moved away from its sport segmentation and instead broke up its business into women’s, men’s and kids. Some critics say that’s part of the reason why Nike’s innovation pipeline fell apart because the business was more focused on lifestyle products geared to a wide range of consumers, instead of being directed at athletes.

Realignment

On a call with analysts, Hill said the company is realigning teams to focus back on sports. "Nike, Jordan and Converse teams will now come to work every day with a mission to create the most innovative and coveted product, footwear, apparel and accessories for the specific athletes they serve," Hill said.

Wholesale Partnerships

On the wholesale front, Nike is moving into more retailers and highlighted fresh efforts with brands like Aritzia and Urban Outfitters. Hill also discussed the decision to come back to Amazon and start selling on the platform for the first time since 2019.

Conclusion

In conclusion, Nike’s financial performance has been impacted by its turnaround plan and new challenges such as tariffs. However, the company expects sales and profit declines to moderate ahead and is working to mitigate the costs of tariffs. With a focus on stabilizing its business and investing in its future, Nike is poised for improvement.

FAQs

Q: What is Nike’s expected financial impact from tariffs in fiscal 2026?
A: Nike expects the financial impact to fiscal 2026 gross margin to be 0.75 percentage points, with a greater impact expected in the first half.
Q: How has Nike’s supply chain been affected by tariffs?
A: About 16% of Nike’s supply chain is in China, and the company expects to reduce that to the high single digit percentage range by the end of its current fiscal year.
Q: What is Nike’s strategy for mitigating tariff costs?
A: Nike intends to "fully mitigate" tariff costs over time by tweaking its supply chain, working with factory and retail partners, and implementing price increases.
Q: How has Nike’s business been affected by its turnaround plan?
A: Nike’s profits fell by 86% in the fiscal fourth quarter as the company worked to clear out stale inventory, woo back wholesale partners, and reset its digital business.
Q: What is Nike’s focus under its new CEO, Elliott Hill?
A: Hill is focusing on bringing Nike back to its sports focus, realigning teams to create innovative products for specific athletes, and winning back wholesale partners.