Nike (NYSE:NKE) shares edged higher on Wednesday, recovering from early losses after the sportswear giant reported fourth-quarter earnings that included a significant boost from tariff recoveries. However, a sharp rise in accounts receivable and a flat revenue trajectory left investors questioning the underlying strength of demand.
The stock traded at $41.40, up 0.9% from Tuesday's close, after dipping as low as $39.21 earlier in the session. The broader market was weaker, with the SPDR S&P 500 ETF Trust (SPY) down 0.4% and the Consumer Discretionary Select Sector SPDR Fund (XLY) off 0.2%.
Earnings Boosted by Tariff Recovery
Nike reported fourth-quarter diluted earnings per share of $0.72, which included a $0.52 benefit from tariff recovery under the International Emergency Economic Powers Act (IEEPA). Excluding that item, adjusted EPS came in at roughly $0.20, topping the LSEG consensus estimate of $0.13, according to Reuters. Gross margin surged 890 basis points to 49.2%, with Nike attributing about 900 basis points to tariff recovery. Without that benefit, gross margin would have been roughly flat year-over-year.
Revenue for the quarter was $10.97 billion, down 1% as reported and 4% on a currency-neutral basis. The company cautioned that revenue would continue to decline in the first half of fiscal 2027.
Receivables Surge Raises Red Flags
Balance sheet metrics painted a more challenging picture. Accounts receivable jumped 26% to $5.93 billion from $4.72 billion a year ago, while inventories remained flat at $7.50 billion. Annual revenue was essentially unchanged at $46.40 billion. Receivables days of sales rose to 46.7 from 37.2, indicating slower cash collection. Inventory days held steady at 59.
CFO Matthew Friend noted on the earnings call that “sell-through remains challenged,” adding that the “consumer is under pressure around the world.”
Weakness in Direct Sales and China
Wholesale revenue rose 4% in the quarter, but Nike Direct fell 7%, with Nike Brand Digital down 12% and owned stores off 7%. Greater China revenue dropped 12% as reported and 17% on a currency-neutral basis, with footwear sales in the region declining 17%. China accounts for about 15% of Nike's annual revenue.
CEO Elliott Hill said on the post-earnings call that Nike is “not living up to our full potential,” and stopped short of calling a bottom. Analysts expressed caution. Cristina Fernandez at Telsey Advisory Group said the “turnaround is progressing slowly,” while David Swartz at Morningstar noted that “improvement in results has been limited.”
Outlook and Strategic Initiatives
Nike is planning over a dozen new shoe launches and has increased marketing spending ahead of the World Cup, but Hill said it will take time for new products to drive consistent growth. Fourth-quarter sales in North America were up 3%, while EMEA dropped 1% and Asia Pacific & Latin America edged up 1%.
Investors will be closely watching whether Nike can translate its tariff-related accounting gains into genuine demand recovery, or if the rising receivables signal deeper challenges ahead.
