Nike Q4 Results and Strategic Reset June 26th 2025

Ray Marce

Alright, welcome back to Equity Research, everyone. I’m Ray Marce, here with Mark Dalli, and today we’re diving into Nike’s Q4 and full-year 2025 results. Mark, I’ll be honest, these numbers are a bit of a gut punch if you’re a long-term Nike holder.

Mark Dalli

Yeah, Ray, it’s not pretty. Fourth quarter revenues down 12% reported, 11% currency-neutral. Full year, we’re looking at a 10% drop in revenue, and net income down 44%. That’s a big reset for a company that’s usually a growth machine.

Ray Marce

And it’s not just the top line, is it? Gross margin took a real hit—down 440 basis points to 40.3% in Q4. That’s a lot of margin compression, especially for a brand that’s always prided itself on premium positioning.

Mark Dalli

Exactly. And the drivers are pretty clear: higher discounts, especially in factory stores and wholesale, plus supply chain cost deleverage. They’re still working through excess inventory, and that’s forced them to be more promotional than they’d like. SG&A was up 1% in the quarter, mostly from increased demand creation—so, more marketing spend—but operating overhead actually declined a bit.

Ray Marce

Yeah, and if you look at the regions, it’s a mixed bag, but mostly negative. North America down 11%, EMEA down 10%, Greater China down 20%—that’s a big one—and APLA down 3%. Even Nike Direct, which is usually a bright spot, was down 14% in Q4, with digital down a whopping 26%. The only real positive was a 2% increase in Nike-owned stores.

Mark Dalli

And EBIT margins—ouch. North America EBIT down 29%, EMEA down 41%, China down 45%. It’s across the board. The only place that wasn’t a disaster was APLA, and even there, EBIT was down 33%.

Ray Marce

You know, Mark, I’ve been tracking Nike’s margin compression versus some of the other brands in my portfolio—like, say, Lululemon or even Adidas. And it’s fascinating, because Nike’s always had this cost structure advantage, but when you get these big swings in discounting and supply chain costs, it really exposes how much leverage is built into the model. I mean, you can’t just out-market your way out of a margin squeeze forever.

Mark Dalli

No, you can’t. And the new tariffs are just adding fuel to the fire. They’re estimating about a billion dollars in incremental costs from tariffs, and while they’re trying to mitigate that with sourcing changes and some surgical price increases, it’s still a headwind—especially in the first half of fiscal 2026. They’re guiding for another 75 basis points hit to gross margin from tariffs alone next year.

Ray Marce

And inventory’s still elevated, even though it’s flat year-on-year. They’re making progress, but it’s not a clean slate yet. I think, for investors, understanding how these cost structures work—and how quickly they can unravel when demand softens—is absolutely critical. It’s something we’ve talked about before, especially when we covered companies like First Solar and their margin pressures. Nike’s in a different industry, but the lesson’s the same: cost discipline matters, especially when the top line’s under pressure.

Mark Dalli

Yeah, and I’d just add, the tax rate spiked to 33.6% this quarter, compared to 13% last year. That’s mostly one-offs and stock comp, but it didn’t help the bottom line. EPS for the quarter was just $0.14, down 86%. So, yeah, a tough quarter by any measure.

Ray Marce

So, let’s talk about what Nike’s actually doing about all this. They’re not just sitting on their hands. The big theme is this ‘Win Now’ strategy, right? They’ve realigned teams around five key actions—culture, product, marketing, marketplace, and what they call the ‘ground game’—with a sharp focus on five sports, three countries, and five cities. It’s a pretty radical shift from the old structure.

Mark Dalli

Yeah, and they’re moving away from the traditional Men’s, Women’s, and Kids’ silos. Now, it’s all about sport-specific, cross-functional teams. So, Nike, Jordan, and Converse teams are each focused on creating the best products for their particular athletes. The idea is to get closer to the consumer, drive more relevant innovation, and tell better stories. It’s a big bet on specialization.

Ray Marce

And they’re doubling down on Nike Direct—both digital and physical. They want Nike Direct to be a premium destination, especially around big sport moments and product launches. But they’re also being more selective with wholesale partners. You’ve got Dick’s, JD, and now even Amazon coming into the mix, but it’s all about segmentation—making sure the right products are in the right channels, at the right price points.

Mark Dalli

That’s right. And, you know, Ray, this reminds me of when I was an equity analyst back in the early 2000s—companies would try these big realignments, and sometimes it worked, sometimes it didn’t. The key is execution. If you get the teams focused and the incentives right, you can restore growth. But if it’s just a reorg on paper, it doesn’t move the needle. Nike’s betting that this sharper focus on sport and premium experiences will reignite the brand.

Ray Marce

Yeah, and you can see some early signs. For example, their After Dark Run Series in LA brought thousands of women runners together, and it led to their best sales day at The Grove in three years. And the digital bump after the French Open—30% increase in sell-through just from posting athlete looks. So, when they get the storytelling and the product right, it still works.

Mark Dalli

And the new Amazon partnership is interesting. It’s a select assortment, focused on running, training, basketball, and sportswear, with a featured brand store. That’s a big shift for Nike, which used to be pretty resistant to third-party platforms. But it’s all about reaching more consumers, especially as they try to clean up the digital channel and move away from heavy discounting.

Ray Marce

Yeah, and they’re also investing in retail marketing, visual merchandising, and account management to support these wholesale partners. It’s a more hands-on approach, which I think is necessary if you want to control the brand experience across so many different channels.

Mark Dalli

But, look, it’s not going to be an overnight fix. They’re still working through excess inventory, and the digital channel is going to be down double digits again in fiscal 2026 as they reposition it for full-price selling. The hope is that by the second half of the year, the market will be a lot cleaner, and they can start to see the benefits of all these changes.

Ray Marce

Let’s shift gears and talk about product and athletes, because that’s still where Nike shines. Despite all the financial noise, there were some real bright spots this quarter. Nike Running, for example, grew high-single digits, led by the Vomero 18, which became a $100 million franchise in just three months. That’s impressive.

Mark Dalli

Yeah, and women’s basketball is another highlight. The A’ja Wilson A-ONE launch was a huge moment—sold out in three minutes on Nike Digital in North America. They’re planning to double the number of pairs in coming seasons. That’s the kind of athlete partnership that can really move the needle, especially as the women’s game gains momentum.

Ray Marce

And then you’ve got the big athlete-driven moments—Faith Kipyegon’s record chase, Rory McIlroy’s Masters win, Alcaraz and Sinner at Roland Garros, Shai’s NBA championship. Nike’s still the brand that shows up at the biggest moments in sport, and that’s a huge intangible for brand value.

Mark Dalli

Absolutely. But the question is, can these athlete partnerships and new product launches offset the broader sales declines? I mean, the classic franchises—Air Force 1, Dunk, AJ1—are still in decline, and that’s a billion-dollar headwind just in Q4. The hope is that new innovation and athlete energy can fill the gap, but it’s a tall order.

Ray Marce

Yeah, and I think it’s a transition year. They’re rebalancing the portfolio, trying to get back to that formula of innovative product, emotional storytelling, and then scaling it up. The early feedback from wholesale partners is positive, and the holiday order book is up in most regions, except China. So, there’s a path to recovery, but it’s going to take time.

Mark Dalli

And, as we’ve seen in previous episodes—like when we talked about Meta or AMD—sometimes these big pivots take a few quarters to really show up in the numbers. For Nike, it’s all about execution from here. If they can keep the innovation engine running and leverage those athlete partnerships, they’ve got a shot at turning things around.

Ray Marce

Alright, that’s a wrap for today’s episode. Nike’s facing real challenges, but they’re not standing still. We’ll keep tracking their progress as fiscal 2026 unfolds. Mark, always a pleasure breaking it down with you.

Mark Dalli

Likewise, Ray. Thanks everyone for listening. We’ll be back soon with more earnings breakdowns. Take care.

Ray Marce

Cheers, everyone. See you next time.