As ‘Win Now’ strategy gains traction, Nike’s Q4 FY25 likely hits a low

Nike CEO Elliott Hill, eight months on the job, says it’s time for the group “to turn the page” and intensify its focus on connections to sports, a three-brand (Nike, Jordan, and Converse) strategy, and stronger product innovations and marketing stories for its eight billion customers worldwide. He delivered his comments as the company reported Q4 and FY25 results that were “not up to the Nike standard.”

Despite the dreadful numbers, Nike shares increased 9.6 percent in after-hours trading last night as the company posted a smaller sales and profit decline than forecast and projected $1 billion in incremental costs from current imposed tariffs, with the most impact in Q1 ending Aug. 31.

Addressing the tariff environment, inventories and product pipeline

The new and meaningful higher tariff costs will be addressed through a few avenues, including surgical price increases in the US starting this fall and a reduction in China-sourced products from 16 percent in FY25 to a “high single digit” range by the end of FY26. Although cost impacts from tariffs are projected to moderate in H2/26 starting in December, the company is forecasting a 75-basis-point impact on FY26 gross margin from their effect. The group is partnering with suppliers and retail partners to mitigate the structural cost increase from tariffs to minimize the impact on consumers.

At FY end, Nike’s inventories were essentially flat at $7,489 million versus $7,519 million a year earlier. Executives, while stressing that geographies are at different points in their recoveries and reshaping, confirmed that the inventory clean-up in the EMEA is running slightly ahead of plan along with a repositioning of Nike digital. Still, global inventory liquidations will continue in the immediate months ahead, with a “clean market” projected to be achieved by the end of Q1. At Q4 end, inventory levels for classic franchises such as the Dunk and Air Jordan 1 were down by 20 percent year-over-year.

Hill, while admitting the strategy will take time, said he is confident in the new product pipeline that Nike is building. He pointed to higher holiday orders in the EMEA, North America and APLA regions from wholesale partners, and confirmed that overall bookings have been improving sequentially, partly through a better balance between sports performance products and sportswear.

A closer look at Q4 results

In the final period ended May 31, net income tumbled by 86 percent to $211 million from $1,500 million as total revenues fell by 12 percent (11% C$) to $11,097 million from $12,606 million. Wholesale revenues slipped by 9 percent to $6.4 billion as direct sales slid by 14 percent to $4.4 billion as Nike Brand digital sales contracted by 26 percent. Converse sales dropped by 26 percent to $357 million, with declines across all geographies. Constant-currency footwear sales stepped down by 12 percent to $7,185 million, apparel declined by 9 percent to $3,002 million, and equipment sales fell by 1 percent to $567 million. Gross margin declined by a whopping 440 basis points to 40.3 percent from 44.7 percent, because of higher wholesale discounts, elevated discounting in Nike factory stores and headwinds from supply chain, cost deleverage and channel mix.

In the EMEA, Q4 Ebit was down by 41 percent year-over-year at $472 million, as the region’s Q4 revenues declined by 10 percent to $3.0 billion. Wholesale revenue was down by 4 percent as Nike’s direct sales dropped by 19 percent and digital declined by 36 percent. Nike store sales were 5 percent higher year-over-year. The region ended the period with flat inventory dollars and a mid-single-digit unit decline.

Elsewhere, North American Ebit fell by 29 percent to $1,045 million, as the region’s total sales sank by 11 percent to $4,703 million. In Greater China, where a deeper reset of inventory is still needed, Q4 Ebit dropped by 45 percent year-over-year to $304 million on a 20 percent contraction in constant-currency sales to $1,476 million. Nike direct sales were off by 15 percent, and Nike digital sales slipped by 31 percent as wholesale revenues declined by 24 percent.

FY25 and Q1/26 at a glance

On a currency-neutral basis, Nike’s annual sales slipped by 9 percent to $46.3 billion in FY25. Direct revenues were down by 12 percent to $18.8 billion, impacted by a 20 percent decline in brand digital sales and flat revenues from owned stores. Wholesale revenues fell by 6 percent to $25.9 billion, and Converse sales contracted by 18 percent to $1.7 billion. FY25 net income slipped by 44 percent year-over-year to $3.2 billion.

The annual gross margin tumbled by 190 basis points to 42.7 percent, primarily because of higher discounting, changes in channel mix and higher reserves for inventory obsolescence that were partially offset by lower product costs.

Nike’s current Q1 outlook calls for a mid-single-digit drop in revenues and a 350- to 425-basis-point decline in gross margin with 100-basis-point impact from tariffs. SG&A costs, meanwhile, are forecast to rise by low single digits.