Nike, Inc. (NYSE: NKE) shares climbed 2.4% to $42.02 on Wednesday, outperforming the broader market as the SPDR S&P 500 ETF (SPY) edged up 0.1% and the SPDR S&P Retail ETF (XRT) rose 0.2%. The gain added approximately $1.4 billion to Nike's market capitalization, driven by a significant one-time benefit from tariff recoveries.
The athletic footwear and apparel giant reported fourth-quarter fiscal 2026 earnings per share of $0.72, which included a $0.52 boost from a $986 million tariff recovery. Excluding this item, EPS would have been $0.20, still above the $0.13 consensus estimate from LSEG. Gross margin expanded by 890 basis points to 49.2%, largely due to the tariff effect, which contributed about 900 basis points. Without the recovery, gross margin would have been 40.2%, down 10 basis points year-over-year.
Revenue for the quarter totaled $10.97 billion, a 1% decline as reported and a 4% drop on a currency-neutral basis. The top-line weakness was broad-based, with Nike Direct revenue falling 7% reported (down 9% currency-neutral) and Greater China revenue sliding 12% reported (down 17% currency-neutral). Converse continued its downturn, with revenue plunging 32% reported (down 34% currency-neutral). Wholesale revenue, however, rose 4% reported (up 1% currency-neutral), representing about 60% of total sales.
Nike's direct-to-consumer push has faced headwinds, with Nike Brand Digital sales down 12% and company-owned stores falling 7%. The shift back toward wholesale partnerships reflects a strategic pivot as the company seeks to stabilize its top line. CEO Elliott Hill acknowledged ongoing challenges, noting "top-line headwinds" and describing results as "not there yet," while CFO Matthew Friend pointed to "challenged" sell-through and a "consumer under pressure" globally.
Analysts remain cautious. Telsey Advisory Group's Cristina Fernandez described the turnaround as "progressing slowly," citing persistent weakness in sportswear and international markets, and does not expect a rebound before fiscal 2028. Morningstar's David Swartz remarked that low expectations were insufficient to make the quarter look favorable given the sales drop. The company's inventory stood at $7.5 billion, roughly flat year-over-year, with higher unit counts offset by mix changes, limiting cushion against further demand weakness.
Looking ahead, Nike anticipates continued revenue declines through the first half of fiscal 2027 and guides to only modest gross margin improvement in the first quarter. The company plans over a dozen footwear launches later in the fiscal year, but Hill cautioned that it may take time for these new products to drive meaningful growth. The market's focus has shifted from sales expansion to margin performance, with shares trading largely on the tariff recovery and wholesale dynamics.
