Nike Inc. (NYSE: NKE) saw its stock jump more than 15 percent at the market open on Friday following the release of its fourth-quarter earnings report, which exceeded Wall Street expectations despite a notable decline in revenue. The surge reflects investor optimism about the company’s ongoing turnaround efforts and strategic adjustments amid challenging market conditions.
Nike reported earnings per share of $0.14 for the quarter, surpassing the consensus estimate of $0.11. Although revenue fell nearly 12 percent year-over-year to $11.1 billion, it still came in above the expected $10.73 billion. The company’s sales in North America dropped 11 percent, with Greater China experiencing a sharper 21 percent decline. Nike Direct revenue declined 14 percent, and wholesale revenue was down 9 percent. Digital sales took a significant hit, falling 26 percent, though this was partly offset by a 2 percent increase in sales at physical Nike stores. Footwear sales decreased 13 percent, and apparel revenue was down 10 percent.
Nike’s gross margin contracted by 440 basis points to 40.3 percent, mainly due to increased discounting and inventory management efforts. The company is actively working to reduce excess inventory, a move expected to benefit retail partners and stores over the next two quarters.
CEO Elliott Hill acknowledged that while the results met internal expectations, they are not where the company wants them to be. He emphasized that the quarter reflects the most significant financial impact of Nike’s restructuring initiatives, which are designed to reset the company’s product portfolio and distribution strategy. CFO Matthew Friend highlighted that the company expects margin pressures and revenue declines to ease as these changes take hold. Nike anticipates a mid-single-digit revenue decline in the first quarter of fiscal 2026 and expects gross margins to contract further by 350 to 425 basis points, including about a 100 basis point impact from tariffs.
One of the key challenges facing Nike is the effect of tariffs, which the company estimates could add approximately $1 billion in costs. In response, Nike is shifting its manufacturing footprint away from China to other countries to reduce exposure to these tariffs and improve cost predictability. This strategic pivot has been well received by investors, who see it as a proactive step to manage geopolitical risks and protect margins over the long term.
Following the earnings release, several major financial institutions raised their price targets and upgraded their ratings on Nike shares. JPMorgan increased its price target from $56 to $64 while maintaining a neutral rating, noting signs of improving demand trends. Bank of America raised its price target to $84 and maintained a buy recommendation, citing confidence that Nike has passed its most difficult period and is poised for sales growth and margin expansion in the second half of 2026. HSBC upgraded its rating from hold to buy and raised its price target from $60 to $80, pointing to tangible evidence of an imminent sales recovery and margin improvement once inventory cleanup is complete.
Nike’s shares have rebounded approximately 20 percent since April, attempting to break free from a prolonged downtrend that began after the stock peaked in 2021. The recent gap up has pushed the stock above its 50-day moving average and close to the 200-day moving average, a technical level it has not approached in some time. This breakout could mark the start of a sustained recovery if the stock maintains momentum in coming weeks.
While Nike faces ongoing headwinds from tariffs, inventory adjustments, and margin pressures, the company’s earnings beat and strategic initiatives have injected fresh optimism into its outlook. Investors appear encouraged by management’s clear plan to navigate these challenges, rebuild its product lineup around performance and storytelling, and strengthen its distribution channels. The stock’s strong reaction suggests that the market believes Nike’s turnaround is gaining traction and that better days may lie ahead for the iconic sportswear brand.
