Nike (NYSE: NKE) reported fiscal fourth-quarter revenue of $10.97 billion on Tuesday, surpassing the $10.86 billion consensus estimate from LSEG, yet the headline figure masks underlying challenges. Revenue declined 1% year-over-year on a reported basis and fell 4% on a currency-neutral basis, signaling persistent demand headwinds.
Tariff Recovery Skews Earnings Picture
The company reported diluted earnings per share of 72 cents, but that includes a 52-cent benefit from an expected $986 million recovery of International Emergency Economic Powers Act tariffs. The recovery became probable after a U.S. Supreme Court ruling deemed those tariffs unauthorized. Excluding this benefit, adjusted EPS was approximately 20 cents, compared to 14 cents a year earlier, while gross margin would have been roughly 40.2%, nearly flat with last year's 40.3%.
Channel Performance Mixed
Wholesale revenue rose 4% to $6.6 billion, reflecting progress in repairing retailer relationships under CEO Elliott Hill. However, Nike Direct sales fell 7% to $4.1 billion, dragged down by a 12% decline in Nike Brand Digital and a 7% drop in company-owned stores. The divergence highlights the challenge of balancing direct-to-consumer growth with wholesale partnerships.
Regional Weakness Persists
Greater China remained a weak spot, with revenue falling 17% on a currency-neutral basis to $1.30 billion. While this was better than the 20% decline Nike projected in March, it worsened from the prior quarter's 10% drop. The region accounts for about 15% of annual sales and faces intense competition from local rivals Anta Sports Products (HKG: 2020) and Li Ning (HKG: 2331).
Financial Health and Outlook
Inventories stood at $7.5 billion, flat year-over-year, as higher unit volumes were offset by product mix shifts. Cash, equivalents, and short-term investments totaled $9.0 billion, down roughly $100 million from last year. Nike returned $609 million through dividends in Q4, while full-year share buybacks were just $123 million under its $18 billion authorization. CFO Matthew Friend noted that "sell-through remains challenged" and the company is cutting costs to improve efficiency.
CEO Elliott Hill acknowledged "top-line headwinds" but pointed to progress in performance products. Investors now face a critical test: whether wholesale strength can sustain without further pressure on Nike Direct, and whether the China decline moderates before the tariff benefit drops out of year-over-year comparisons. Nike shares were down 35% year-to-date prior to the earnings release, reflecting market skepticism about the turnaround.
