Nike Earnings: Transformation Progress Overshadowed by Near-Term Challenges

Key Morningstar Metrics for Nike

• : $97.00
• : ★★★★★

• Morningstar Economic Moat Rating

  : Wide

• Morningstar Uncertainty Rating

  : High

What We Thought of Nike’s Earnings

Nike’s NKE sales fell 1% in the fourth quarter of fiscal 2026, as a 12% decline in Greater China (11% of total) offset a 3% rise in North America (44%). Operating expenses fell 2% on reductions in marketing and administrative costs. Excluding a tariff refund, EPS rose to $0.20 from $0.14 last year.

Why it matters: Launched a year and a half ago, CEO Elliott Hill’s “Win Now” plan has brought cost reductions, more efficient inventory management, and a reorganization to align product development and marketing around athletics. However, improvement in results has been limited.

• Nike’s sales outpaced our estimate by 1%, but trends slowed in the second half of the quarter. Management attributed this weakness to higher gas prices and the war in the Middle East and suggested that sales would remain subpar through (calendar) 2026.
• In addition, Nike intends to reduce near-term sell-in intentionally to limit oversupply and discounts, especially for casual apparel and shoes. More positively, rising sales of performance products, such as running footwear, provide confidence in Hill’s strategy.

The bottom line: We expect to reduce our $97 fair value estimate for Nike shares by a low-single-digit percentage, given the soft near-term outlook. However, we think progress will be more apparent in (calendar) 2027 as many products are released and margins improve.

• We think Nike retains its brand advantages in global sportswear, the source of our wide moat rating. Within about three years, we think it will return to mid-single-digit yearly sales growth and mid-teens EBIT margins.

Between the lines: There have been reports that Nike may prevent its partners in China, such as narrow-moat Topsports, from selling through digital channels to prevent discounts. We do not expect Nike to go this far. Instead, it will likely work with partners to improve inventory management.