What Happened?
Shares of athletic apparel brand Nike (NYSE: NKE) jumped 16.1% in the morning session after the company reported fiscal fourth-quarter 2025 results that beat Wall Street's expectations and outlined plans to mitigate costs.
Although Nike's fourth-quarter revenue fell 12% to $11.1 billion, the figure was still better than analysts had feared. The company reported earnings per share of $0.14, topping the consensus estimate of $0.12. Investors were particularly encouraged by the company's strategic plans, including efforts to reduce its reliance on manufacturing in China. Nike announced it expects to lower the proportion of US-bound footwear sourced from China from 16% to the high single-digits by the end of fiscal 2026. This move is aimed at mitigating the impact of tariffs, which the company warned could add about $1 billion in costs.
Despite the sales decline and the significant drop in gross margin, the market reacted positively to the earnings beat and the proactive steps to re-align the supply chain for future growth.
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What The Market Is Telling Us
Nike’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. But moves this big are rare even for Nike and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 12 months ago when the stock dropped 19.6% on the news that the company reported weak second-quarter results. Unfortunately, its constant currency revenue missed. The company recorded weaknesses in its Lifestyle brand, especially in the Digital channel. Notably, digital channel sales declined 10% due to softer traffic, higher promotions, and lower sales of certain classic footwear franchises. Management cited these issues, in addition to macro headwinds (especially in China) and unfavorable FX, as the reasons for revising FY'25 guidance. Nike guided for fiscal 2025 sales to be down mid-single digits. Sales in the first half (1H'25) were expected to be down high single digits (vs. previous guidance for low single digits decline). Precisely, revenue was expected to be down 10% in Q1'25, given most of the challenges called out during the earnings call. Overall, this was a bad quarter for Nike.
Nike is down 0% since the beginning of the year, and at $73.66 per share, it is trading 21.8% below its 52-week high of $94.19 from June 2024. Investors who bought $1,000 worth of Nike’s shares 5 years ago would now be looking at an investment worth $768.42.
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