Sportwear giant Nike’s (NYSE:NKE) Q4 results were sufficiently encouraging to suggest CEO Elliott Hill’s turnaround strategy has some traction. Revenues and earnings beat Wall Street estimates. And in another positive, the trainers-to-soccer balls titan received a one-off tariff refund of almost $986 million.
So why did investors give the shares the boot after the Wall Street market close on 30 June?
A 12% plunge in Greater China sales certainly spooked investors. But the biggest disappointment was Nike’s downbeat guidance. The Oregon-based company forecast ‘flattish’ earnings for Q1 and Q2 of FY27.
Patience wearing thin
For the quarter to May 2026, Nike posted adjusted earnings per share of 20 cents, ahead of the 13 cents Wall Street expected. Net income of $1.07 billion was flattered by a $986 million tariff-related refund.
Without this boost, the trainers-to-basketballs seller’s underlying performance remained rather weak. And that is what is testing the patience of long-suffering investors.
Q4 revenue was 1% lower year-on-year at a smidge below $11 billion. That was better than the $10.9 billion Wall Street expected but represented Nike’s lowest quarterly sales figure since February 2022.
Sales in North America, Nike’s largest market, grew 3% to $4.83 billion, which was short of analysts’ expectations of $4.88 billion. In Greater China, revenues dropped 12% to $1.3 billion, though this was ahead of the $1.24 billion analysts were calling for.
The Oregon-based sportswear giant blamed its uninspiring guidance on tariff risk, Middle East disruption and weak consumer sentiment linked to high oil prices.
Decisive actions
‘In fiscal 2026, we took decisive actions to strengthen the foundation of Nike and reposition our business for long-term growth,’ commented Hill.
‘We made meaningful structural improvements to lay the groundwork for our Sport Offense across our team culture, innovative product, brand strength, and how we serve consumers in our countries and cities.’
Hill added: ‘While we continue to face top-line headwinds, we’re encouraged by progress in performance product and are focused on consistent execution, improved profitability and scaling our wins to realise our full potential.’
Nike shares have shed 75% of their value over the last five years and are flashing red on a one-year view too. Hill is doing all the right things to revive Nike’s fortunes, but it is taking longer than expected to turn this super-tanker round. Prevailing macroeconomic uncertainty, tariffs, the Middle East conflict and soaring gas prices are hardly helping.
The Nike consumer is under pressure around the world. And the company needs to win back the market share it has surrendered to the likes of Adidas, Hoka, On and Chinese sportswear brands. As such, restoring Nike to its former glories will take longer than many analysts expected.
Hill is working to get Nike’s core business back on track with a push into sports such as basketball and running. He is also stepping up innovation. And pivoting Nike back to retail and away from a disastrous direct-to-consumer strategy under previous management which alienated retail partners and surrendered shelf space to competitors.
Read the press release here: https://investors.nike.com/Home/default.aspx
