Nike Earnings Prep: Trailing in the 4th Quarter
Nike’s story has always been about getting bigger, relentlessly, every cycle. To the bulls: winning; to the bears, at what cost?
But under Elliott Hill who came back as CEO in late 2024, NKE 0.00%↑ is deliberately getting smaller where it got sloppy. That reset has a cost, and they have been paying for it in margin. While the top line has roughly stopped falling, Tuesday’s report will show whether cost has peaked.
Nike runs about $46.3B of revenue a year, down from a $51.4B peak in FY24. It sells two ways, through wholesale partners like Foot Locker and Dick’s and through its own stores and apps, NIKE Direct, and leans most on North America at $19.6B, with EMEA, Greater China, and Asia Pacific and Latin America behind it. Footwear is about two-thirds of the brand, apparel most of the rest, with a shrinking Converse ($1.7B) on the side.
The “Win Now” plan runs on a few moves, each deliberately bad for this year’s numbers. Hill is pulling back the classic franchises (Air Force 1, Dunk, Air Jordan 1) Nike had been flooding into the market; resetting NIKE Direct and digital away from constant promotions toward full price; rebuilding the wholesale relationships the prior regime walked away from; and putting marketing behind sport rather than cutting it.
The unwind rebuilds brand health at the cost of near-term sales, and above all, margin. Consolidated gross margin has gone 44.6% in FY24 to 42.7% in FY25 to 40.2% in Q3 FY26. Management has guided Q4 down another 25 to 75 basis points, landing near 39.9%, lower than any year in over a decade. For contrast, lululemon, a premium model still runs near 56.6%.
So heading into Tuesday, here’s what we’re watching:
Gross Margin and Tariffs. The Q3 release pinned the 130-basis-point margin drop “primarily due to higher tariffs in North America,” and the Q4 guide bakes in roughly 250 basis points of tariff drag. The math is noisy: management flagged a tariff-refund benefit that lands in Q4 and reverses in FY27, so if margin beats the ~39.9% guide, we will look to see whether a refund is overstating it. Management’s plan bakes in margin expansion starting in Q2 FY27.
Greater China. China used to be the profit center but its nine-month segment EBIT has fallen from $1,298M to$1,035M year-on-year, down 20%. This is against a quarterly peak near $973M in early 2021. Management guided China revenue down about 20% again in Q4 on deliberate cleanup. There are brand-heat problems there (Anta, Li-Ning) but fixes are not fully in Nike’s control. We will watch whether the decline is decelerating -- seeing that calendar 2026 is the worst of it matters more than the Q4 figure.
Wholesale versus Direct. The clearest sign the reset is working will come from how these channels split. In Q3, wholesale grew 5% while NIKE Direct fell 4%. For full-year FY25, Direct dropped 12.7% to $18.8B against wholesale’s softer 6.8% decline to $25.9B. These data points show that direct-to-consumer model is going the wrong direction, but if we see wholesale staying positive, that could be a sign that retail partners are re-buying the brand.
Cash. Nike pushed marketing to a record $4.69B in FY25, up 9.4% even as revenue fell, spending into the downturn rather than cutting. At the same time it nearly stopped buying back stock: just $146M in the first nine months of FY26
versus $2.79B a year earlier, with operating cash flow roughly halved to $3.7B. One possibility is a buyback restart, which would signal management thinks the cash trough is behind it.
Footwear. Footwear fell 11.7% to $29.5B in FY25 while apparel held up better at
down 5.9% to $13.0B. Footwear is where the classic-franchise pullback bites hardest. We will look to see if it turns less negative as new running and basketball product replaces the cut volume.
Consensus for Q4 is about $10.85B of revenue, down roughly 3%, and near $0.11 of EPS against Q3’s $0.35. The stock sits near $45, down about 44% from its $80 high last August, and RBC, JPMorgan and Stifel have all cut targets toward $47 to $50 on a slower-than-hoped turnaround.
The most important thing Tuesday will be the FY27 margin framing: if the Q2 FY27 inflection holds and wholesale stays positive, the floor is near. If the FY27 guide slips or the tariff drag widens, we would expect the bill to grow before it shrinks. It is also Matthew Friend’s last quarter as CFO; David Denton, lately Lowe’s CFO, takes over August 17, so watch how the handoff is framed.
All data sourced via #deepKPI from NIKE’s 10-K, latest 10-Q, and quarterly 8-K press releases, with additional context from analyst reporting and regulatory filings.