Nike stock in extended trading saw a rally after the company told investors during its earnings report that profit and sales declines would narrow in the current quarter. Nike, the sneaker giant stated that the costs from tariffs are expected to approach $1 billion for the company.
For Nike tariff could bring fresh challenges, making a tough turnaround that much more difficult. On a call with analysts, finance chief Matt Friend called the duties a “new and meaningful” cost. “With the new tariff rates in place today, we estimate a gross incremental cost increase to Nike of approximately $1 billion” in its current fiscal year 2026, Friend said.
Nike fiscal 2025 results
As per Nike, currently, about 16% of its supply chain is in China and it expects to reduce that to the high single-digit percentage range by the end of its current fiscal year, which is expected to end next summer.
Friend said the company will consider cost cuts, but its highest priority remains stabilizing its business, which requires investment.
Once those efforts are implemented, Friend said the financial impact to fiscal 2026 gross margins is expected to be 0.75 percentage points, with a greater impact expected in the first half.
Nike’s earnings
Nike beat estimates on the top and bottom lines beating Wall Street’s estimate.
Let’s look at Nike’s earnings report for the three-month period that ended May 31, compared with estimates from analysts polled by LSEG:
Nike’s earnings per share: 14 cents per share vs. 13 cents expected
Nike’s revenue: $11.10 billion vs. $10.72 billion expected
The sneaker giant reported net income for the quarter was $211 million, or 14 cents per share, compared with $1.5 billion, or 99 cents per share, a year earlier.
Sales for Nike dropped to $11.10 billion, down about 12% from $12.61 billion a year earlier.
Last quarter, Nike warned that its fiscal fourth quarter would be the low point of its turnaround, but in the months since, conditions worsened, leaving investors wondering if more pain was still to come.
As per CEO Elliott Hill said it is time to “turn the page.”
“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,” said Hill. “From here, we expect our business results to improve.”
Nike declining sales
For the current quarter, Nike expects sales to decline by a mid-single-digit percentage, in line with expectations of down 7%, according to LSEG. It expects its gross margin to be down between 3.5 and 4.25 percentage points, including 1 percentage point from the tariff rates currently in place today.
Nike shares initially dropped after its report was released but moved about 10% higher during the company’s conference call.
During the quarter, Nike’s profits fell a staggering 86% as it worked to clear out stale inventory
During the quarter, Nike Direct revenue, representing stores, wholesale and its website, fell 14%, led by a 26% drop in digital sales and a 9% decline in wholesale.
Nike stores, however, were a bright spot. During the quarter, sales at Nike stores rose 2%.
Nike fall in revenue
Revenue fell in all regions during the quarter, but came in a bit better than expected in North America, Nike’s largest market. Sales fell 11% to $4.70 billion in North America, better than the $4.42 billion analysts had expected, according to StreetAccount.
Still, China revenue came in at $1.48 billion, just below the $1.50 billion analysts had expected, according to StreetAccount.
Nike’s partnerships
During the quarter, it released a new sneaker and collection for A’ja Wilson, a star center with the Las Vegas Aces.
The first drop sold out in three minutes and the company plans to double the amount of pairs in the coming seasons, Hill said.
During Nike’s conference call, its delayed partnership with Skims was not discussed or asked about.
Stiff competition faced by Nike
Nike is facing stiff completion and has lost market share to athletic apparel competitors such as Lululemon and Alo Yoga. Though sneakers are what brings major business for Nike, but apparel is a growth area for the company.
Nike stock update
Nike stock gained as much as 11% late Thursday. Though Nike stock is down more than 34% year over.
