NIKE, Inc. reported fourth-quarter revenue of $10.97 billion for fiscal year 2026, surpassing analyst expectations of $10.86 billion, while shares declined 1.04% to $41.05. The company's net income surged 407% to $1.1 billion, driven by a one-time $986 million recovery of International Emergency Economic Powers Act (IEEPA) tariffs. Excluding this benefit, diluted earnings per share stood at $0.20. Despite the earnings beat, Nike anticipates fiscal year 2027 revenue to decline low-to-mid single digits, citing pressure on traffic and discretionary spending.

Elliott Hill, President and Chief Executive Officer, NIKE, Inc., stated the company took decisive actions to strengthen its foundation and reposition for long-term growth. When asked about stability, Hill remarked, "I don't think there's been anything normal since I've sat in this chair," highlighting operational volatility. Management emphasized progress in performance product categories like running and football, while facing continued headwinds in Nike Sportswear and Jordan Streetwear, which plummeted in double digits.

Structural Overhauls and Guidance

Nike is pivoting back to athletic performance under its new "Sport Offense" operating model, which has redeployed 8,000 employees into vertical sport categories. Technical running footwear secured its fifth consecutive quarter of double-digit growth. However, lifestyle apparel and franchise footwear categories are projected to remain negative through the front half of fiscal 2027. The company adjusted its forward guidance, warning that revenues will decline low to mid-single digits over the next six months as it slashes wholesale supply and pulls back on digital promotions.

Fourth Quarter Performance

Fourth-quarter revenues reached $10.97 billion, dipping 1% year over year on a reported basis to $11.0 billion and down 4% on a currency-neutral basis. Gross margin increased 890 basis points to 49.2%, largely due to the IEEPA tariff recovery. Excluding this benefit, gross margin would have been 40.2%. Selling and administrative expense decreased 2% to $4.1 billion. The effective tax rate was 19.6%, compared to 33.6% in the same period last year.

Full Year Results

For the full fiscal year, revenue was flat on a reported basis and down 2% on a currency-neutral basis. Net income was $3.1 billion, down 3%, and diluted earnings per share was $2.10, a decrease of 3%. Gross margin increased 20 basis points to 42.9%. Inventories were $7.5 billion, flat compared to the prior year.

Shareholder Returns

NIKE returned approximately $2.5 billion to shareholders in fiscal 2026, including dividends of $2.4 billion, up 5%, and share repurchases of $123 million. The company’s four-year, $18 billion share repurchase program remains active.

UBS analyst Jay Sole maintains a Neutral rating on Nike and lowers the price target from $50 to $48. The revised target reflects a reassessment of the company's current market position and future performance prospects.

The decision to lower the price target comes amid evolving market conditions. Despite the reduction, the Neutral stance suggests that Nike's stock is expected to perform in line with the broader market.

Key Details

Investors should note that the price target adjustment does not imply a change in the overall rating. The Neutral rating indicates that the stock is neither a strong buy nor a sell at this time.