Shares of Nike surged as much as 10% in premarket trading on Friday after the company offered a more optimistic first-quarter revenue forecast and outlined strategic measures to reduce its dependence on Chinese manufacturing.
The moves, aimed at countering the impact of tariffs and rebuilding wholesale partnerships, sparked investor optimism that the world’s largest sneaker brand may be turning a corner after a prolonged slump.
The rally in Nike’s stock also lifted British sportswear JD Sports, a key retail partner, whose shares climbed 7.2% to 87.6 pence.
Nike forecasts milder revenue dip after steep Q4 decline
Nike now expects its revenue in the first quarter to decline in the mid-single-digit percentage range, slightly outperforming consensus estimates that projected a 7.3% drop.
This marks an improvement from the company’s fourth-quarter performance, during which sales dropped 12% year-on-year to $11.1 billion.
That figure, however, came in ahead of analysts’ expectations of $10.72 billion.
Earnings per share in the latest quarter were 14 cents, beating the Wall Street consensus of 12 cents, though significantly lower than the $1.01 posted in the same period last year.
The decline reflects Nike’s ongoing efforts to aggressively discount products to clear out excess inventory and make room for new merchandise.
CEO Elliott Hill, who took the reins earlier this year, has signaled a reset for the company with renewed focus on performance innovation, supply chain resilience, and rebuilding relationships with wholesale partners.
The company is also increasing marketing spend to drive demand, particularly in running, basketball, and lifestyle categories.
However, these investments have weighed on margins.
Gross margin in the fourth quarter fell 440 basis points to 40.3%, with the company attributing the decline to deeper discounts and an unfavorable shift in channel mix.
Still, management emphasized that these moves were necessary to reset the business and prepare for a more streamlined product pipeline.
Tariff costs of $1 bn expected; Nike seeks to reduce exposure to China
Tariffs remain a significant headwind for Nike and the company expects the levies will result in a cost increase of about $1 billion over the coming year, pressuring gross margins by about 75 basis points.
The brunt of the impact would be felt in the first half of the fiscal year. To mitigate the fallout, Nike is accelerating efforts to reduce its exposure to China.
Currently, about 16% of its US footwear imports originate from China. That figure is expected to drop to the high single digits by the end of fiscal 2026.
“We expect this to reduce to the high single-digit range by the end of fiscal 2026,” Hill said, adding that China will still remain a key part of the company’s global supply chain.
The company plans to shift more production to countries like Vietnam and Indonesia while also implementing price increases where feasible.
While many global footwear brands still depend on Asia for manufacturing, Nike’s scale and global reach may give it an advantage in managing supply chain transitions.
Analysts say that the company’s proactive approach positions it better than some competitors facing similar challenges.
Recovery depends on wholesale reboot and brand reinvigoration
Beyond manufacturing, Nike is working to repair ties with wholesale partners that were severed under former CEO John Donahoe, whose direct-to-consumer push alienated key retailers like Macy’s and DSW.
The company is now re-engaging with these players while forging new partnerships, including with Amazon.
CEO Hill said early demand signals were encouraging, particularly in the performance segment, and that wholesalers were placing more orders ahead of the holiday season.
“We’re organising into a sport offence to have deeper relationships with the athletes we serve, to gain better insights, to drive sport-specific innovation, tell inspiring stories and differentiate ourselves in the marketplace,” he told analysts.
Despite the improving outlook, Hill cautioned that a full recovery would take time.
Nike still faces fierce competition from rising athletic brands such as On Holding and Deckers’ Hoka, which have gained ground as Nike focused on cutting costs and recalibrating its strategy.
Analyst consensus: company stabilising; V-shaped recovery by FY27
11 brokerages increased their price targets post the earnings.
JP Morgan (“Neutral” with a PT of $64) noted that Nike’s solid results in its core sports categories were a positive sign amid broader concerns about US consumer trends.
Barclays (“Equal Weight,” PT: $64) said the company is facing near-term pressure from excess inventory and restructuring, but sees early signs of recovery through improving wholesale demand and strategic execution
Evercore ISI (“Outperform,” PT: $90) said the company is managing expectations by highlighting key challenges ahead: digital traffic is set to decline sharply, retro product demand will remain a drag, and China sales are expected to be negative.
Morgan Stanley (“Equal Weight,” PT: $64) said the company is stabilizing with modest estimate upgrades driven by strategic shifts, but long-term growth and margin concerns linger amid weak digital sales and intensifying competition
Jefferies analyst Randal Konik said the company is positioned for a “V-shaped recovery” by fiscal 2027. “As competitive pressures ease, execution improves, and with easier comps ahead, we continue to Just Buy It,” he wrote in a research note.
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