Nike posted stronger-than-expected earnings and revenue for its fiscal fourth quarter, though a massive tariff refund inflated the headline numbers.
The company reported adjusted earnings per share of 20 cents, well above the 13 cents analysts had anticipated, according to consensus estimates from LSEG.
Revenue came in at $10.97 billion, edging past Wall Street’s forecast of $10.86 billion for the quarter.
Shares of NKE dropped as much as 8% in extended trading Tuesday before recovering much of those losses as investors digested the details.
The standout figure buried in the results was a gross margin increase of 8.9%, driven largely by an expected tariff refund of nearly $986 million under the International Emergency Economic Powers Act.
On a reported basis, diluted earnings per share reached 72 cents, including a 52-cent benefit tied directly to the expected recovery of those tariffs.
Analysts had excluded that gain from their adjusted estimates, and excluding the benefit entirely, gross margin would have been 40.2%, down 10 basis points versus the prior year.
Company executives confirmed on an analyst call that Nike had collected over $300 million in cash related to its tariff refund claims as of the quarter’s end.
Net income for the quarter reached $1.07 billion, a sharp improvement from $211 million, or 14 cents per share, reported in the same period a year earlier.
Wholesale revenue rose 4% to $6.6 billion, but that gain was offset by a 7% decline in Nike Direct revenue to $4.1 billion, as digital sales fell 12% and company-owned store sales dropped 7%.
North America, Nike’s largest market, posted revenue of $4.83 billion, a 3% increase, though it narrowly missed analyst expectations of $4.88 billion according to StreetAccount.
Sales in Nike’s Greater China market dropped 12% year over year to $1.30 billion, though that still beat Wall Street’s forecast of $1.24 billion in revenue for the region.
CEO Elliott Hill said on the analyst call that the company is “fully committed to winning” the China market back, signaling continued investment in that region despite persistent headwinds.
For the full fiscal year 2026, Nike reported net income of $3.11 billion, or $2.10 per share, down from $3.22 billion, or $2.16 per share, in the prior fiscal year.
Full-year gross margin edged up to 42.9%, and selling and administrative expenses remained flat at $16.1 billion, reflecting ongoing cost discipline across the business.
Looking ahead, Nike reiterated guidance from last quarter, expecting earnings to be “flattish” through the first two quarters of fiscal 2027, with gross margin for the first quarter expected to be slightly positive.
The company’s Converse brand remains a significant drag, posting a second consecutive quarter of revenue declines exceeding 30%, compounding broader pressure on the direct-to-consumer segment.
Hill has been working to reposition Nike for growth after a prolonged period of slumping sales, and the company has previously acknowledged its turnaround would not be linear.
The wholesale channel is beginning to respond to renewed outreach efforts, but falling direct-to-consumer revenue is outpacing the company’s ability to redirect inventory to retail partners.
Investors will be watching closely whether the turnaround gains traction in fiscal 2027 without the benefit of a one-time tariff windfall to pad the results.
