Nike shares fell 4% in premarket trading on Wednesday after the sportswear giant’s latest quarterly results failed to convince investors that its turnaround under Chief Executive Officer Elliott Hill is gathering pace.
Although Nike topped Wall Street expectations for both earnings and revenue, a cautious outlook for the coming quarters, persistent weakness in China and continued uncertainty around consumer demand overshadowed the better-than-expected performance.
The company’s results also weighed on European sportswear stocks, with Adidas and Puma both falling more than 1% in early trading.
Nike shares have already declined around 35% this year as investors grow increasingly concerned about the pace of the company’s recovery amid rising competition and shifting consumer preferences.
Earnings beat fails to reassure investors
Nike reported fiscal fourth-quarter earnings of 20 cents a share, excluding a 52-cent benefit related to the expected recovery of import tariffs.
Revenue declined 1.1% from a year earlier to $11 billion.
Analysts polled by LSEG had expected earnings of 12 cents per share on revenue of $10.9 billion.
Despite the earnings beat, investors focused on management’s guidance that sales are expected to continue declining through the first half of fiscal 2027 as the company navigates tariff pressures, geopolitical uncertainty and cautious consumer spending.
Nike now expects revenue to decline by low- to mid-single digits during the period from March through November, compared with its earlier forecast for a low-single-digit decline.
The company also continues to expect earnings to remain largely flat over the same period.
“We are not expecting the environment to improve meaningfully over the next six months,” Chief Financial Officer Matthew Friend said during the earnings call, citing evolving tariff policies, conflict in the Middle East and oil prices as factors that could pressure both costs and consumer demand.
Given the uncertain backdrop, Nike plans to tighten inventory and reduce orders, a strategy management believes will support margins but weigh on near-term revenue.
Sports strategy shows early progress
Despite the muted outlook, some analysts said Nike’s renewed focus on sports is beginning to deliver encouraging signs.
Jefferies analysts said the company’s fiscal fourth-quarter results were better than feared.
“Nike’s emphasis on its sports business is showing early signs of paying off, though performance in China remains a drag on the company,” the brokerage wrote.
According to Jefferies, Elliott Hill’s “sport offense” strategy has helped return Nike’s wholesale business to growth, validating the company’s renewed emphasis on performance categories.
However, analysts said continued weakness in Nike’s direct-to-consumer business, including its retail stores and digital platform, remains a significant challenge.
Nike has spent the past two years rebuilding relationships with wholesale partners while attempting to reduce excess lifestyle inventory that had weighed on sales and margins.
The company also pointed to early progress in several areas, including stronger World Cup marketing campaigns, faster product launches and improving football demand after a slowdown in April.
Management forecast a slightly positive gross margin during the first quarter and said more than a dozen new footwear styles are scheduled for launch as part of the company’s product refresh.
CEO Elliott Hill acknowledged that rebuilding consumer demand will take time.
“We know we’re not living up to our full potential,” he said.
China continues to weigh on recovery
China remains one of Nike’s biggest obstacles.
Revenue in Greater China, which accounts for roughly 15% of Nike’s annual sales and is its third-largest market after North America and Europe, the Middle East and Africa, continued to post double-digit declines during the quarter.
Outgoing finance chief Matthew Friend said the company expects China to remain under pressure as Nike works with retail partners to clear excess inventory.
Some analysts said the restructuring effort is beginning to show signs of progress but warned that meaningful sales growth is unlikely until the inventory reset is complete.
Nike is pursuing a more premium, sports-focused strategy in China, although analysts expect the benefits of that approach to emerge gradually rather than immediately.
Hill said the company expects newly launched footwear products to contribute more meaningfully to growth during 2027 as the broader product pipeline gains traction.
Recovery may take longer than expected, analysts say
Analysts remain divided over how quickly Nike can regain lost market share.
Bernstein said the company’s decision to prioritise marketplace health over short-term revenue growth is strategically sound but likely to delay any meaningful earnings recovery.
“Revenue declines through H1 mean no earnings growth until at least H2’27 as Nike prioritizes marketplace health over near-term sales — a good decision for the company but not for rapid recovery of the stock,” Bernstein analysts said.
Nike has struggled to regain momentum after losing customers to newer athletic brands while also dealing with softer consumer demand globally.
In March, management acknowledged that efforts to revive growth were taking longer than expected despite improving trends in North America, particularly in running and football footwear.
Some analysts, however, remain unconvinced that Nike’s latest product launches have resonated strongly enough with consumers.
The company’s digital business has also remained under pressure as Nike attempts to reposition the platform around higher-priced products rather than relying on discounting.
The prolonged decline in Nike’s share price has also prompted speculation that the stock could eventually lose its place in the Dow Jones Industrial Average.
Wall Street has become increasingly cautious in recent weeks.
KeyBanc Capital Markets downgraded the stock last week, saying investors may have to wait until Nike’s investor day later this year before gaining greater confidence in the company’s long-term turnaround strategy.
Even after Wednesday’s decline, Nike trades at a forward price-to-earnings multiple of about 21.95, above Adidas’ multiple of 16.81, according to LSEG data, suggesting investors continue to price in a recovery that has yet to fully materialise.
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