Nike's stock fell after the company released its fourth-quarter earnings report on Tuesday, June 30th, despite reporting an estimated $0.11 EPS, which met or slightly exceeded analyst expectations ranging from $0.07 to $0.15. Revenue for the quarter was approximately $10.85 billion, representing a 2% year-over-year decline. The shares were already hovering near 11-year lows, and the decline marked Nike's eighth consecutive quarter of falling profits. Analysts had prepared investors for the possibility that the fourth-quarter results would underscore the difficulty of the company's ongoing turnaround strategy.
The cautious sentiment among investors was fueled by the company's commentary on its turnaround efforts and demand. Management previously stated, "Our comeback is taking longer than we would like," and indicated that gross margin expansion is not expected until the second quarter of fiscal 2027 (ending November 2026), when the impact of tariffs is projected to lessen. For the current quarter, management anticipates a revenue decline of 2%-4%.
Key concerns highlighted by analysts, such as Bank of America's Lorraine Hutchinson, included the performance of the China business and an update on wholesale sell-through. Nike's Greater China revenue is expected to decline by 20% in Q4 due to reduced wholesale demand and internal efforts to reset the marketplace. The company has been reducing sell-in to wholesale and pulling back on digital discounting, which may pressure sales in the near term. The competitive landscape in China, with local and global rivals vying for shoppers, further complicates Nike's recovery there. Analysts noted that fourth-quarter results included a one-time benefit from tariff refunds, and without this, the quarter's performance was largely in line with prior guidance.
In addition to operational challenges, Nike announced a significant leadership change with Matthew Friend stepping down as CFO on August 17th, to be replaced by David Denton. While Friend will participate in the June 30th earnings call, CFO transitions can sometimes be seen as red flags for companies facing difficulties. Analysts noted that a longer-term roadmap or fiscal 2027 guidance is unlikely before Nike's fall investor day, which might be delayed due to the CFO transition. The consensus analyst rating is cautious, with a mix of "Holds" and "Neutral" ratings, reflecting a wait-and-see approach regarding the effectiveness of Nike's "Win Now" turnaround plan.
