Here's our initial take on Nike's (NKE 15.28%) fiscal 2025 fourth-quarter financial report.
Key Metrics
| Metric | Q4 FY24 | Q4 FY25 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $12.6 billion | $11.1 billion | -12% | Beat |
| Earnings per share (adjusted) | $1.01 | $0.14 | -86% | Beat |
| NIKE Direct revenue | $5.1 billion | $4.4 billion | -14% | n/a |
| Gross margin | 44.7% | 40.3% | -4.4 pp | n/a |
A Rough Quarter for Nike
Nike beat analyst expectations with its fiscal fourth-quarter results, but the bar was low. Total revenue tumbled 12% year over year, and adjusted earnings per share were down 86%. The company's financial results were "not where we want them to be," said CEO Elliott Hill in the earnings release.
Nike is executing on its Win Now strategy, which centers around running, basketball, football, training, and sportswear. The negative financial impact of this plan was at its highest during the fourth quarter, and the company is also dealing with an uncertain economic environment. While revenue tumbled, demand creation spending rose 15% to $1.3 billion as the company boosted spending on sports marketing and brand marketing.
NIKE Direct, the company's direct-to-consumer business, saw revenue plunge by 14% year over year, largely due to a 26% drop in digital sales. Wholesale revenue was down 9%, and Converse revenue dropped 26%. Gross margin dove more than 4 percentage points to 40.3%, driven lower by higher discounts and the sales shift away from direct-to-consumer.
Nike expects the headwinds from the Win Now initiatives to become less severe in future quarters, although the state of the economy will remain a wild card.
Immediate Market Reaction
Shares of Nike were down about 1% in after-hours trading soon after the fourth-quarter report was released. While Nike's revenue and profit plunged, analysts were expecting worse. The company didn't provide an outlook in its earnings release, and while Hill struck an optimistic tone, a lack of details may have rubbed investors the wrong way. Going into the fourth-quarter report, Nike stock is trading down 17% year to date.
What to Watch
Nike's turnaround is going to take time if the fiscal fourth-quarter report is any indication. The company's focus on specific sports could help repair its brand and pay off in the long run, but step one is halting the revenue and profit declines. An uncertain economic climate and trade landscape aren't doing the company any favors. Investors should tune into the earnings call, recorded on Thursday evening, to hear management go into more detail on the company's turnaround strategy.
