NKE Q4 Deep Dive: Flat Sales, Margin Pressures, and a Focus on Turnaround

Athletic apparel brand Nike (NYSE:NKE) announced better-than-expected revenue in Q4 CY2025, but sales were flat year on year at $12.43 billion. Its non-GAAP profit of $0.53 per share was 41.3% above analysts’ consensus estimates.

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StockStory’s Take

Nike’s fourth quarter saw flat year-on-year sales and a significant operating margin decline, which led to a sharp negative market reaction. Management linked these results to ongoing efforts to reset its classics business, promote new product lines, and address regional weaknesses, notably in China. CEO Elliott Hill described the company as being in the "middle innings" of a turnaround, acknowledging that while North America performed well, other regions lagged behind. CFO Matt Friend cited higher tariffs and inventory clean-up, especially in Greater China, as major contributors to the margin pressure.

Looking ahead, Nike’s leadership is focused on accelerating its turnaround by investing in product innovation and operational efficiency, particularly through its 'sport offense' strategy. Management emphasized that improvement will take time, with each region and brand progressing at its own pace. As Hill put it, "The win now actions and the sport offense is working and it will lead us back to profitable, sustainable growth." The company plans to prioritize margin recovery, a healthier product mix, and deeper connections with consumers to support long-term growth.

Key Insights from Management’s Remarks

Nike’s management identified regional disparities, product portfolio shifts, and operational actions as key factors shaping the quarter’s performance and outlook.

• Regional performance split: North America led growth with strong wholesale gains and notable performance in running and basketball categories, while Greater China and other international regions continued to face inventory and traffic challenges.
• Product innovation pipeline: New launches such as the Structure 26 running shoe and upcoming platforms like NIKE Mind and Aerofit were highlighted as central to future growth, aiming to diversify the product mix beyond classic footwear.
• Margin headwinds from tariffs: Higher U.S. import tariffs added roughly 320 basis points of gross margin pressure, with management noting that even after mitigation efforts, tariffs remain a significant drag on profitability.
• Inventory and promotional actions: The company acted to lower aged inventory, especially in China, and reduced promotional days in key markets, which management believes will help restore premium brand positioning but has short-term impacts on revenue and margins.
• Leadership and organizational changes: CEO Elliott Hill restructured reporting lines so all geographies now report directly to him, aiming for faster decision-making and better alignment of local strategies with global priorities.

Drivers of Future Performance

Nike’s guidance for the coming quarters centers on product innovation, operational discipline, and regional execution as levers for revenue and margin recovery.

• Strategic focus on North America: Management expects North America to continue driving growth, citing momentum in running, basketball, and wholesale channels, supported by cleaner inventory and reduced discounting.
• Ongoing China reset: The company is prioritizing a comprehensive reset in Greater China, including new store concepts, refreshed assortments, and targeted investments, but cautioned that recovery in this region will be gradual and may weigh on overall results.
• Margin recovery challenges: While aiming to return to double-digit EBIT margins long-term, Nike faces continued pressure from tariffs, an evolving product mix, and the costs of repositioning legacy categories. Management plans to leverage supply chain efficiencies and optimize marketing spend to support gradual improvement.

Catalysts in Upcoming Quarters

In the next few quarters, our analysts will be closely monitoring (1) the pace of recovery in Greater China following the marketplace reset, (2) sustained momentum in North America’s performance categories and wholesale channels, and (3) whether margin pressures from tariffs and product mix shifts begin to ease. Progress on new product launches and the effectiveness of leadership changes will also be critical for assessing Nike’s trajectory.

Nike currently trades at $59.26, down from $65.90 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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