Nike Tops Earnings Estimates Amid China Sales Dip, Anticipates Major Tariff Refund

New York, NY - Nike, Inc. (NYSE: NKE) announced its fiscal fourth-quarter results today, reporting earnings and revenue that surpassed Wall Street expectations. However, the athletic apparel giant also revealed a significant 12% drop in sales within its crucial Greater China market, even as it anticipates a substantial tariff refund that bolstered its gross margin.

Financial Highlights and China Challenges

For the fiscal fourth quarter, Nike reported adjusted earnings per share of 20 cents, exceeding the analyst consensus of 13 cents. Revenue for the quarter reached $10.97 billion, also beating the expected $10.86 billion. Despite these positive top-line and bottom-line figures, shares saw a notable dip in extended trading before recovering some losses.

A key driver for the improved gross margin, which increased by 8.9%, was an anticipated tariff refund of nearly $986 million. This refund, stemming from a Supreme Court decision on global duties, contributed a significant 52 cents to the company's earnings per share for the quarter. Executives noted that Nike had already collected over $300 million in related cash by the quarter's end.

Market Performance and Strategic Outlook

While North America, Nike's largest market, saw a modest 3% revenue increase to $4.83 billion, it fell slightly short of analyst expectations. The more concerning figure came from Greater China, where sales declined by 12% to $1.30 billion. Nevertheless, this performance was still better than the $1.24 billion anticipated by Wall Street for the region.

CEO Elliott Hill acknowledged the challenges in China, stating, "Overall, the results aren't there yet. We know we're not living up to our full potential, particularly in Nike sportswear and Jordan streetwear, where sell through remains challenged, impacting both current discounting and future order books." He affirmed the company's commitment to regaining market share in the region.

Broader Business Context

The company's overall net income for the quarter was $1.07 billion, or 72 cents per share, a significant increase from the $211 million, or 14 cents per share, reported in the same period last year. Total revenue declined slightly by 1% year-over-year.

Looking ahead, Nike reiterated its previous guidance, projecting earnings to be "flattish" through the first two quarters of fiscal 2027, with a slightly positive gross margin expected for the first fiscal quarter of 2027. These projections come amidst broader economic uncertainties, including inflation and geopolitical tensions, which CFO Matt Friend noted are pressuring consumers globally, particularly impacting the sportswear segment.

The earnings report follows recent strategic moves by Nike, including a significant round of layoffs in April aimed at streamlining operations. The company also announced a planned transition in its Chief Financial Officer role, with David Denton set to succeed Matt Friend in August.

Despite the headwinds, Nike has capitalized on the global attention surrounding the World Cup, with its marketing efforts reportedly outperforming competitors and gaining substantial traction on social media. Hill emphasized that the company is leveraging the tournament to reshape its business and build sustained momentum.