Nike stock experienced a remarkable surge of 17% on Friday after the company announced that it has overcome the most challenging phase of its struggles. This positive shift follows a fiscal fourth-quarter earnings report that exceeded investors' expectations, alleviating fears regarding the impact of President Donald Trump's tariff hikes on key manufacturing hubs such as China and Vietnam.
In its latest report, Nike revealed a disappointing fiscal fourth quarter, characterized by a 12% drop in sales, an 86% plunge in net income, and shrinking profit margins. However, CEO Elliott Hill reassured investors by emphasizing that the company has emerged from its deepest slump. Hill stated during an earnings call, “The results we're reporting today in Q4 and in FY25 are not up to the Nike standard, but as we said 90 days ago, the work we're doing to reposition the business through our 'Win Now' actions is having an impact.”
Hill expressed optimism that the decline in sales and profits would begin to stabilize in the coming quarters, signaling a potential turnaround for the company. “It’s time to turn the page,” he added, emphasizing the positive trajectory of Nike’s recovery strategy.
Despite the initial drop in stock prices following the earnings release, Nike's shares rebounded significantly, climbing more than 10% in after-hours trading. This surge was attributed to Hill's assurances about the effectiveness of the turnaround plan and updates on new product launches. Notably, Hill announced Nike's decision to resume selling on Amazon for the first time since 2019, along with initiatives aimed at attracting female shoppers.
During the quarter, Nike launched products in over 200 women-led shops, including a notable collaboration with WNBA star A'ja Wilson, which sold out in just three minutes. By Friday morning, Nike's stock continued to rise as several banks issued positive assessments of the company. HSBC upgraded Nike’s rating from hold to buy—the first such upgrade in over three and a half years—and raised its price target to $80, indicating a 28% upside from Thursday's closing price.
While Nike appears to be making strides toward recovery, the company faces significant challenges in the current economic landscape. Factors such as weakened consumer sentiment, rising debt levels, tariffs, and broader economic uncertainties raise concerns about spending and overall GDP growth. Nike anticipates a mid-single-digit percentage decline in sales for the current quarter, aligning with Wall Street's expectations of a 7% drop, according to LSEG.
Additionally, Nike is working to clear out stale inventory from its classic Dunks and Jordan lines. Efforts to liquidate old inventory have negatively impacted profit margins and sales, as the company has resorted to deep discounts and clearance sales. Sales for classic models like the Air Force 1, Air Jordan 1, and Dunks fell more than 20% compared to the previous year. In the fourth quarter alone, this decline accelerated to 30%, costing the company nearly $1 billion in sales, according to finance chief Matt Friend.
While inventory levels for the Air Force 1 have begun to stabilize, Nike continues to address excess supply of its Dunk franchise, which will likely affect profits in the first half of the current fiscal year. Both Hill and Friend acknowledged that Nike’s profits may remain under pressure through the first half of fiscal 2026 as the company navigates inventory challenges and rising tariff costs. However, they expressed optimism for profit improvements in the latter half of the year.
When questioned about potential timelines for returning to revenue growth, Hill remained cautious, stating, “Just because of everything that's going on, we're going to take it 90 days at a time. We believe full recovery will take time.”
Correction: This article has been updated to correct the spelling of Aritzia.
