Nike stock soared 17% on Friday after the company said the worst of its struggles are behind it, following a better than feared fiscal fourth-quarter earnings report.
Nike on Thursday reiterated it would take the biggest financial hit from its turnaround plan during the quarter, soothing investors who worried President Donald Trump’s tariff hikes on key Nike manufacturing hubs like China and Vietnam would derail the company’s comeback.
Nike posted a poor fourth quarter, as sales dropped 12%, net income plunged 86% and profit margins dwindled. But CEO Elliott Hill stressed the company has emerged from the worst of its slump, and the slide in sales and profits would begin to moderate in the quarters ahead.
“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 on an earnings call, referencing the name of the company’s turnaround plan. “From here, we expect our business results to improve. It’s time to turn the page.”
With few details about the progress of Nike’s turnaround strategies in the company’s earnings release, shares initially fell when it posted results after the closing bell Thursday. By the end of an hour-long call with Nike executives and Wall Street analysts, the stock had surged more than 10% in extended trading.
Beyond assuring investors that the turnaround plan is working, Hill shared promising updates on new product launches and Nike’s efforts to win back wholesale partners, which have been key areas of focus since he took over in October.
Hill shared details behind Nike’s decision to begin selling on Amazon for the first time since 2019 and its push to win over female shoppers, another priority for the company.
During the quarter, the company launched products in over 200 women’s led shops, including Artizia, and released its collection with WNBA star A’ja Wilson, which Hill said sold out in three minutes.
By Friday morning, the stock climbed even higher after numerous banks issued bullish commentary on the company. HSBC upgraded Nike to buy from hold, its first buy rating on the stock in three-and-a-half years.
HSBC also raised its price target to $80, implying a 28% upside from Thursday’s close.
“Long in the making but we think the inflection is finally here,” analyst Erwan Rambourg wrote in a research note. “We think there is more than tangible evidence that Nike has a path to see its sales rebound in the not-too-distant future, and its margins to be repaired, and this despite an unfavorable tariff headwind.”
Nike’s results show the company is rebounding on a timeline Wall Street likes. But don’t call it a comeback just yet.
The sneaker giant is trying to grow again at a shaky time for the economy, as weaker consumer sentiment, rising debt, tariffs and mass deportations raise questions about spending and GDP.
Nike still expects sales to decline in its current quarter by a mid-single-digit percentage, in line with Wall Street expectations of a 7% drop, according to LSEG.
It also has more work to do to clear out stale lifestyle inventory from its classic Dunks and Jordan lines. Those efforts to liquidate old inventory have hit profit margins and sales because Nike has had to rely on deep discounts, clearance channels and the off-price sector to clear out that glut.
In fiscal 2025, which ended last month, sales for classics like the Air Force 1, Air Jordan 1 and Dunks declined more than 20% compared to the year-ago period. In the fourth quarter, that accelerated to 30%, which impacted sales by nearly $1 billion, finance chief Matt Friend said.
Air Force 1 inventory levels have started to stabilize but Nike is still working to clear out supply of its Dunk franchise, which will affect the company’s profits through the first half of its current fiscal year, said Friend.
Both Hill and Friend said Nike’s profits will be under pressure through the first half of fiscal 2026 as it works through its inventory and contends with higher costs from tariffs. They said they expect profits to improve in the second half of the year.
However, when it comes to actual sales growth, it’s still too early to tell when the company will stop shrinking.
When asked if there are any scenarios where the company could get back to revenue growth this year, Hill declined to share a timeline.
“Just because of everything that’s going on, we’re going to take it 90 days at a time,” said Hill. “We believe full recovery will take time.”
