Nike faces critical earnings week amid growing analyst skepticism

This cautious outlook reflects lingering doubts about whether Nike’s recent strategies are translating into sustained operational improvement or if the small sales uptick from the prior quarter was merely a blip.

Flat to slightly down revenue amid persistent inventory and promotion hurdles

Market analysts anticipate revenue of roughly $12.22 billion (€11.6bn), hovering flat or slightly down year-on-year. This forecast echoes wider concerns around ongoing inventory normalisation and intense promotional activities that continue to weigh on top-line results. Despite a tentative 1 percent sales increase in the previous quarter, investor confidence remains fragile, underscoring scepticism about Nike’s ability to reverse a decline that has persisted since early 2024.

Investor mood muted by leadership changes and uncertain strategy payoffs

The Nike stock rally observed after the last earnings announcement was short-lived, with share prices retreating amid growing doubts over the company’s turnaround narrative. Investors and sneaker enthusiasts alike are calling for clearer proof that Nike’s refocusing on sport and innovation is fuelling sustained demand rather than relying on isolated product hits.

Since Elliott Hill assumed the CEO role over a year ago, he has spearheaded organisational reforms pivoting to sport-centric teams and a product-led approach. However, ongoing executive reshuffles, such as the recent elimination of the chief technology and chief commercial officer roles, have sparked criticism of management churn and clouded near-term execution clarity.

Whilst fresh product launches and amplified marketing campaigns signal momentum, experts caution that Nike’s product pipeline requires deeper innovation to outpace nimble competitors such as On and Asics.

Operational and cost challenges weigh heavily on margins

Nike’s operational hurdles are well-documented. Earlier this year, Reuters and company disclosures revealed steep revenue declines and a bloated inventory pile, estimated to total around $8 billion (€7.6bn) in excess stock, significantly compressing margins. Key market weaknesses and an 11 percent drop in store foot traffic contributed to heavier markdowns by retail partners. Additionally, rising tariff costs, notably from production hubs like Vietnam, alongside elevated capital expenditures, continue to pressure financial results.

CEO Hill has candidly outlined expectations of mid-single-digit revenue declines and gross margin contractions of approximately 350 to 425 basis points in the first quarter, factoring in an estimated 100 basis points negative impact from tariffs applied at current rates.

Tariffs and discounting central to near-term profitability concerns

Tariff-induced cost increments loom as a critical headwind, with Nike forecasting around $1bn (€950m) in tariff-related expenses for the fiscal year. Investors will scrutinise how effectively Nike manages to pass on these costs to consumers whilst retreating from heavy discounting, which currently undermines margins. The balance between tariff impact and promotional reliance will be pivotal in this quarter’s earnings assessment.

Competitive pressures and channel dynamics add complexity

Footwear sales, constituting nearly two-thirds of Nike’s revenue, remain under pressure due to stiff competition from fast-growing peers On and Hoka. Whilst small gains may appear in apparel and equipment segments, the divergence between Nike’s direct-to-consumer and wholesale channels is expected to continue, with wholesale maintaining a relative edge in the near term.

Moody’s and other rating agencies anticipate profit margins reaching their nadir before seeing gradual improvements, contingent on effective execution and rebounding demand.

The road ahead: high stakes for marketing, inventory and margin stability

Looking forward, investors await definitive signs that Nike’s 2026 initiatives will convert strategy into scalable growth. Global sporting events such as the Winter Olympics and next year’s FIFA World Cup offer prime platforms to showcase marketing initiatives and product innovation. However, the company’s ability to translate these high-profile campaigns into sustained revenue growth, margin improvement and progress on inventory reduction will be crucial.

This quarter’s results, whilst unlikely to provide a complete turnaround blueprint, represent a critical test of Nike CEO Elliott Hill’s leadership. Clear evidence of tariff impact mitigation, inventory normalisation and healthier sales less dependent on discounting could buy the company valuable runway to prove its “Win Now” strategy is effective.

As the results announcement and subsequent conference call unfold Thursday afternoon, the market will seek clarity on whether Nike is on the path to reclaiming growth or risk further share-price underperformance in a highly competitive apparel landscape.