Nike shares slipped Tuesday evening despite the company posting better‑than‑expected quarterly results.
Total revenue in fiscal 2026’s fourth quarter dipped 1% year‑over‑year to $10.97 billion, topping Wall Street expectations of $10.86 billion.
Earnings per share rose 42% to 20 cents, beating the consensus of 13 cents. This figure excludes a 52‑cent benefit from the anticipated recovery of the IEEPA tariffs overturned by the Supreme Court earlier that year.
The roughly 2% after‑hours drop places shares around $40, a decline of about 35% year‑to‑date.
After earlier disappointing March earnings, the new results are unlikely to restore confidence in the portfolio.
While running and other segments have shown progress under the “Win now” strategy, the turnaround remains slower than anticipated.
Management has been slow to adjust excess inventory, faced challenges in China, limited product innovation, and a tougher competitive landscape; macro conditions add further pressure.
The company highlighted aggressive moves to cut promotions and improve gross margins, and reiterated a flat EPS guide for the third quarter of FY 2027 through the first two quarters.
The guidance avoids significant cuts, which helped stabilize the stock after the earnings call.
Prioritizing margin improvement could earn Nike patience ahead of its Investor Day in November and a new CFO.
We remain uncertain whether the inflection will have the sharp impact markets expect; the competitive environment remains fierce.
Therefore, we consider allocating capital elsewhere, and the club rating and price target are under review.
Regional results: North America sales fell short, up 3% year‑over‑year, but EBIT decreased; China was worse than expected; Asia Pacific & Latin America beat expectations; Europe, Middle East & Africa also exceeded forecasts.
Channel mix: Wholesale revenue grew 4% reported, 1% currency‑neutral; Direct revenue fell 7% reported, 9% currency‑neutral; Converse sales dropped 32% year‑over‑year.
Inventory levels remained flat, reflecting shifts in product mix.
Guidance: revenues to be down low single digits year‑over‑year; gross margins to improve in Q2; EPS flat over the period; management will tighten buys, reduce markdowns, and better inventory to improve margins sooner.