Source Credit : Portfolio Prints
Nike reported stronger-than-expected fiscal fourth-quarter earnings and revenue on Tuesday, outperforming Wall Street expectations despite continued weakness in its crucial China market. The athletic apparel giant posted adjusted earnings of 20 cents per share, comfortably ahead of analysts' forecasts of 13 cents, while revenue reached $10.97 billion, exceeding the expected $10.86 billion.
Despite the earnings beat, Nike's shares initially fell by as much as 8% in after-hours trading as investors focused on the company's cautious outlook before recovering much of those losses.
A major contributor to the stronger results was a nearly $986 million tariff refund following the U.S. Supreme Court's decision to strike down many of President Donald Trump's global tariffs. The refund boosted Nike's gross margin by 8.9 percentage points and added approximately 52 cents per share to quarterly earnings. Since analysts had excluded the one-time gain from their adjusted earnings estimates, Nike still delivered an earnings beat on an underlying basis. Company executives also revealed that Nike had already collected more than $300 million in cash related to its tariff refund claims by the end of the quarter.
Nike reported net income of $1.07 billion, or 72 cents per share, a significant improvement from $211 million, or 14 cents per share, in the same period a year earlier. Quarterly revenue totaled $10.97 billion, representing a modest 1% decline from $11.10 billion in the prior-year quarter.
Regional performance remained mixed. Revenue in North America, Nike's largest market, increased 3% to $4.83 billion, reflecting improving consumer demand, although it came in slightly below analysts' expectations of $4.88 billion. In contrast, sales in Greater China fell 12% year over year to $1.30 billion as the company continued to face softer demand and intense competition. Even so, the result exceeded Wall Street's forecast of $1.24 billion, suggesting conditions were somewhat better than expected.
Speaking to analysts after the results, CEO Elliott Hill acknowledged that the company's recovery in China remains incomplete but reaffirmed Nike's long-term commitment to the market. He noted that while progress has been made, the company is still not reaching its full potential, particularly in Nike Sportswear and Jordan streetwear, where weaker sell-through continues to affect both current discounting and future order volumes.
For the full fiscal year 2026, Nike reported net income of $3.11 billion, or $2.10 per share, compared with $3.22 billion, or $2.16 per share, in the previous fiscal year. Looking ahead, the company reaffirmed the guidance issued last quarter, expecting earnings to remain largely flat through the first two quarters of fiscal 2027 while forecasting a slight improvement in gross margin during the first quarter.
The latest results come as Hill continues implementing a long-term turnaround strategy aimed at restoring sustainable growth after several quarters of slowing sales. Management has repeatedly emphasized that the recovery will not be linear, with different business segments improving at varying speeds. Hill recently noted that the areas targeted early in the turnaround plan are beginning to gain momentum, although meaningful progress will take time.
Nike's recovery efforts are also unfolding against a challenging macroeconomic backdrop characterized by ongoing tariff uncertainty, geopolitical tensions in the Middle East, elevated fuel prices, and cautious consumer spending. Chief Financial Officer Matt Friend said the company's customers remain under pressure across global markets, with the sportswear category experiencing double-digit sales declines during the quarter.
As part of its broader restructuring efforts, Nike eliminated approximately 1,400 positions in April, marking its second round of workforce reductions this year. The company also recently announced a leadership transition in its finance division, with former Pfizer executive David Denton set to succeed Friend as Chief Financial Officer on August 17.
Despite the operational challenges, Nike benefited from heightened global exposure during this summer's FIFA World Cup in North America. Although the company is not an official tournament sponsor, its marketing campaigns generated significantly greater engagement across social media than rival Adidas. Hill said Nike is using the tournament not merely as a marketing event but as a catalyst to strengthen its brand, connect with diverse consumer communities, and build momentum that extends well beyond the competition.
