Nike Stock Up 10% Despite 12% Sales Drop: How "Worst Quarter" Won Market Faith

TradingKey - On June 26, global leading sports brand Nike Inc. (NKE) released its financial reports for the fourth quarter and the full fiscal year 2025. Although revenue declined in the last quarter, it still exceeded market expectations, and Nike forecasted that it had passed its operational low point. Starting from this quarter, both revenue and profit declines are expected to moderate, which led to an impressive after-hours stock price increase of up to 10%.

(Source: Google Finance)

Nike's latest earnings report shows that although quarterly revenue fell 12% year-on-year to $11.1 billion — the lowest level since the third quarter of 2022 — this figure still exceeded market expectations of $10.72 billion. Quarterly net profit plunged 86% year-on-year to $211 million. Earnings per share (EPS) came in at 14 cents, significantly down from 99 cents a year earlier, but slightly above the analysts' forecast of 13 cents.

Global revenue for fiscal year 2025 totaled $46.3 billion, marking a year-on-year decline. However, Greater China emerged as a highlight, recording full-year revenue of $6.585 billion and fourth-quarter revenue of $1.476 billion, both of which surpassed market expectations. This outcome reflects initial success from Nike’s localization strategy, which includes channel optimization, product innovation, and community engagement.

Bloomberg industry research analyst Punam Goyal stated, "The progress being made in focusing on innovation is showing early signs of success. While more effort is still needed, Nike appears to be moving in the right direction."

CEO Elliott Hill stated during the earnings call that the fourth quarter represented “the most significant financial impact period” for the company's supply chain cleanup, digital business adjustments, and wholesale channel reforms; he noted that adverse factors will gradually ease in the future. Previously, the company warned that “Q4 was a critical low point for turning losses into profits,” and this report outcome aligned closely with management’s expectations.

Nike mentioned that tariffs imposed by former President Donald Trump on major trading partners could result in increased costs of approximately $1 billion this year.

In response to tariff pressures, Nike proposed a three-pronged strategy:

In terms of supply chain management, it plans to gradually reduce reliance on Chinese supplies (currently 16%).

Regarding pricing strategy, it will initiate phased global price increases starting in Fall 2025, with a focus on high-end product lines and categories heavily affected by tariffs.

For cost control measures, it aims to “fully mitigate” tariff costs through deeper collaboration with factories and retail partners.

Management emphasized a future focus on “long-term value creation,” continuing investments in sustainability, and technological innovation. The Greater China region remains viewed as a key growth engine with plans for deeper execution of its localization strategy, including building sports research laboratories and optimizing product combinations.

According to TradingKey data, Wall Street analysts have an average target price of $71.143 for Nike, implying a potential upside of 16.95% from the current stock price. Among 41 institutions, only two hold a "sell" rating.