Nike Stock Leaps as CEO Signals Turnaround is Working
Shares of sportswear giant Nike (NKE) saw a significant jump on Friday, soaring 17% following the company’s fiscal fourth-quarter earnings report. While the results themselves reflected ongoing challenges, CEO Elliott Hill’s commentary struck a hopeful tone, assuring investors that the most difficult period is likely behind the company and a path toward recovery is becoming clearer.
The stock’s strong performance suggests Wall Street is responding positively to Nike’s strategic adjustments, even as the company navigates a complex retail environment and works through persistent operational issues.
Why Did Nike Stock Jump Despite Poor Results?
Nike’s reported fiscal fourth quarter was numerically challenging: sales fell 12%, net income plummeted 86%, and profit margins were squeezed. However, the results were largely anticipated, and the company had previously warned that this quarter would bear the brunt of its “Win Now” turnaround plan’s financial impact.
What reassured investors was CEO Elliott Hill’s forward-looking message during the earnings call. Hill emphasized that the aggressive actions taken to reposition the business are beginning to have an effect. He stated, “The results we’re reporting today in Q4 and in FY25 are not up to the Nike standard, but… the work we’re doing… is having an impact.” Crucially, he added, “From here, we expect our business results to improve. It’s time to turn the page.”
This confidence from leadership, coupled with the earnings not being worse than feared, appears to have soothed concerns initially fueled by factors like potential tariff impacts on manufacturing hubs. The stock, which initially dipped after the report was released post-market close on Thursday, surged over 10% during the subsequent hour-long call with executives before climbing further on Friday.
Beyond the Balance Sheet: Strategic Initiatives
Beyond managing expectations and outlining a path to profit moderation, Hill provided updates on key strategic areas aimed at reigniting growth:
New Product Pipeline: Development and launch of new footwear and apparel are seen as crucial drivers for future sales.
Winning Back Wholesale Partners: Efforts are underway to strengthen relationships and distribution through wholesale channels, a key focus since Hill took leadership in October.
Return to Amazon: Nike’s decision to resume selling directly on Amazon since 2019 was highlighted as a move to expand reach.
Focus on the Female Consumer: Significant investment continues in the women’s market, including launches in over 200 women-led shops and successful collaborations like the quick sell-out of the A’ja Wilson collection.
Wall Street Reacts with Bullish Outlooks
The positive sentiment was echoed by several banks issuing bullish commentary on Friday morning. Notably, HSBC upgraded Nike’s stock to “buy” from “hold,” marking its first buy rating on NKE shares in 3.5 years.
HSBC also raised its price target for Nike to $80, implying a potential 28% upside from Thursday’s closing price. Analyst Erwan Rambourg’s note suggested, “Long in the making but we think the inflection is finally here,” adding that there is “more than tangible evidence that Nike has a path to see its sales rebound in the not-too-distant future, and its margins to be repaired.”
Key Hurdles Still Remain
Despite the market’s optimism, Nike acknowledges that the recovery path is not without challenges. The company is attempting to return to growth during a period of economic uncertainty, facing headwinds from:
Weaker consumer sentiment
Rising consumer debt
- Ongoing tariff impacts
Furthermore, the company continues to grapple with excess inventory, particularly in classic lifestyle lines like the Dunk franchise.
Navigating Inventory Challenges
Clearing stale inventory from popular classics like the Air Force 1, Air Jordan 1, and Dunks has significantly impacted recent performance. In fiscal 2025, sales of these classics declined more than 20% year-over-year, accelerating to a 30% drop in Q4, which negatively affected sales by nearly $1 billion.
Finance Chief Matt Friend stated that while Air Force 1 inventory is stabilizing, the company is still working through its Dunk supply. This requires relying on deep discounts, clearance channels, and the off-price sector, which pressure profit margins and sales.
Both Hill and Friend indicated that profits will remain under pressure through the first half of fiscal year 2026 due to inventory efforts and higher tariff costs. They anticipate profit improvement in the second half of the fiscal year.
The Path Forward: Taking It 90 Days at a Time
While investors are encouraged by the profit outlook for the latter half of FY26, the timeline for actual revenue growth remains less certain. When asked about scenarios for returning to sales growth this fiscal year, CEO Elliott Hill declined to provide a specific timeline.
“Just because of everything that’s going on, we’re going to take it 90 days at a time,” Hill explained, underscoring that a full recovery “will take time.”
In summary, Nike’s latest earnings call provided the market with enough confidence in the company’s turnaround strategy and future profit trajectory to send the stock soaring, despite a weak performance quarter. However, the company’s leadership remains cautious, highlighting that tackling inventory issues and navigating a shaky economy means the journey back to consistent revenue growth is still an ongoing process.
