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01/10 22:57
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call indicates challenges with declining revenues and margins, particularly in APLA and due to tariffs. Management's cautious approach and lack of clear guidance on recovery timelines, especially in China, suggest uncertainties. Despite some positive elements like innovation and marketplace cleanup, the overall sentiment is negative due to revenue declines, margin pressures, and unclear recovery paths.
Revenue For the fourth quarter, revenues were down 12% on a reported basis and down 11% on a currency-neutral basis. Reasons for the decline include higher wholesale discounts, supply chain cost deleverage, and channel mix headwinds.
NIKE Direct Revenue NIKE Direct was down 14% with NIKE Digital declining 26% and NIKE stores increasing 2%. The decline in NIKE Digital was due to repositioning as a full-price model and reduced mix of classic footwear franchises.
Gross Margins Gross margins declined 440 basis points to 40.3% on a reported basis. This was due to higher wholesale discounts, higher discounts in NIKE Factory Stores, supply chain cost deleverage, and channel mix headwinds.
SG&A Expenses SG&A was up 1% on a reported basis. This was driven by increased investment in demand creation, up 15%, partially offset by a 3% decline in operating overhead.
Effective Tax Rate The effective tax rate was 33.6% compared to 13.1% for the same period last year. The increase was due primarily to decreased benefits from stock-based compensation and one-time items.
Earnings Per Share (EPS) Earnings per share was $0.14, reflecting the overall decline in revenue and gross margins.
Inventory Inventory was flat versus the prior year and down 1% versus the prior quarter. Inventory remains elevated but progress is being made to clean and reset the marketplace.
North America Revenue Q4 revenue declined 11% in North America. NIKE Direct declined 14% with NIKE Digital down 25% and NIKE stores up 3%. Wholesale declined 8%. Reasons include marketplace cleanup and repositioning NIKE Digital as a full-price model.
EMEA Revenue Q4 revenue declined 10% in EMEA. NIKE Direct declined 19% with NIKE Digital down 36% and NIKE stores up 5%. Wholesale declined 4%. Reasons include marketplace cleanup and repositioning NIKE Digital.
Greater China Revenue Q4 revenue declined 20% in Greater China. NIKE Direct declined 15% with NIKE Digital down 31% and NIKE stores down 6%. Wholesale declined 24%. Reasons include deeper inventory reset and traffic challenges.
APLA Revenue Q4 revenue declined 3% in APLA. NIKE Direct declined 1% with NIKE Digital down 6% and NIKE stores up 4%. Wholesale declined 5%. Reasons include mixed results across countries and elevated inventory.
Vomero 18: Achieved over $100 million in sales within 90 days, showcasing strong consumer demand.
A'ja Wilson's Signature Collection: First shoe, the A'One, sold out in 3 minutes on NIKE Digital in North America, with plans to double production in future seasons.
Air Max 95: Reintroduced to a new generation through targeted marketing and distribution strategies.
Amazon Partnership: Announced a new partnership with Amazon to feature a select assortment of footwear, apparel, and accessories, including a dedicated brand store.
Urban Outfitters Collaboration: Became the #1 brand in select doors during the opening weekend of a Gen Z-targeted experience.
Women's-led Distribution: Expanded into over 200 women's-led doors, including boutiques like Aritzia.
Win Now Actions: Focused on culture, product, marketing, marketplace, and ground game with emphasis on 5 key sports, 3 countries, and 5 cities.
Leadership Restructuring: Flattened leadership structure and made changes to 11 of 15 direct reports to improve decision-making and execution.
Inventory Management: Aggressively reduced aged inventory and improved markdown rates, particularly in North America and EMEA.
Sport Offense Strategy: Reorganized teams by sport rather than by demographic categories to deepen athlete relationships and drive sport-specific innovation.
Marketplace Segmentation: Implemented sharper segmentation to deliver unique assortments and storytelling opportunities across channels.
Tariff Mitigation: Outlined a strategy to reduce reliance on Chinese manufacturing and optimize sourcing to address $1 billion in new tariff costs.
Geopolitical volatility and tariff uncertainty: The sportswear industry continues to operate under geopolitical volatility and tariff uncertainty, which could impact supply chains and cost structures.
Financial performance below expectations: Q4 and FY '25 results were not up to NIKE's standard, reflecting challenges in achieving financial targets.
Inventory challenges: Inventory remains elevated, requiring aggressive actions to clean and reset the marketplace, particularly in Greater China and APLA.
Digital sales decline: NIKE Digital declined 26% in Q4, reflecting challenges in repositioning the platform as a full-price model.
Tariff impact: Newly issued tariffs represent a significant cost headwind, with an estimated gross incremental cost increase of approximately $1 billion.
China market recovery: China's market recovery is expected to take longer due to unique marketplace characteristics and traffic challenges.
Supply chain cost deleverage: Gross margins declined due to higher supply chain costs, wholesale discounts, and channel mix headwinds.
Sportswear and performance imbalance: Declines in classic footwear franchises and challenges in diversifying the sportswear lineup at scale.
Economic uncertainties: Uncertainty in the operating environment, including consumer behavior and macroeconomic factors, creates challenges for forecasting and performance.
Revenue Expectations: Q1 revenues are expected to be down mid-single digits. Holiday order book is up versus the prior year with growth in North America, EMEA, and APLA, partially offset by Greater China.
Gross Margin Projections: Q1 gross margins are expected to decline approximately 350 to 425 basis points, including a 100 basis points negative impact due to new tariffs. Fiscal '26 gross margins will face a 75 basis points impact from tariffs.
Tariff Impact: New tariffs are expected to result in a gross incremental cost increase of approximately $1 billion. Actions to mitigate this include optimizing sourcing, partnering with suppliers and retail partners, implementing phased price increases, and evaluating corporate cost reductions.
Inventory Management: Inventory is expected to be in a healthy and clean position by the end of the first half of fiscal '26. Excess inventory will continue to be liquidated through value stores and select value partners over the next two quarters.
Digital Traffic and Sales: Digital traffic is expected to decline double digits in fiscal '26 as NIKE Digital is repositioned as a full-price model and the mix of classic footwear franchises is reduced.
Product Portfolio Transition: Momentum is building in new product franchises. Classic footwear franchises are expected to continue declining through the first half of fiscal '26, with stabilization expected for Air Force 1 and larger reductions for Dunk.
Regional Performance: North America, EMEA, and APLA are showing momentum and confidence, while Greater China is expected to take longer for recovery due to unique market characteristics. A full recovery in China will take time.
SG&A Growth: SG&A is expected to grow low single digits in fiscal '26, with investments focused on reigniting growth, particularly in demand creation and sports and commercial offense.
Shareholder Return Plan: We have moderated our share repurchases in the near term due to a more dynamic and uncertain environment as well as the impact of the Win Now actions on our financial results. We have a strong balance sheet, and it remains a competitive advantage for our business.
The earnings call reveals several concerning factors: declining revenues in key regions, significant EBIT declines, and gross margin pressures due to tariffs. The Q&A highlights uncertainties, especially in China, and management's reluctance to provide clear timelines or targets. The positive aspects, such as growth in North America and certain product lines, are overshadowed by broader challenges. Without a market cap, the stock's reaction is uncertain, but the overall sentiment suggests a negative outlook for the next two weeks.
The earnings call reveals several challenges: declining revenues in key regions, margin pressures, and digital traffic headwinds. While there are positive aspects like growth in North America and strategic initiatives, the overall sentiment is dampened by significant headwinds in Greater China and digital channels. The Q&A section highlights management's confidence but also reveals uncertainties, especially in China. The lack of clear guidance and the impact of tariffs further contribute to a negative outlook. Given these factors, a negative stock price reaction is expected over the next two weeks.
The earnings call indicates challenges with declining revenues and margins, particularly in APLA and due to tariffs. Management's cautious approach and lack of clear guidance on recovery timelines, especially in China, suggest uncertainties. Despite some positive elements like innovation and marketplace cleanup, the overall sentiment is negative due to revenue declines, margin pressures, and unclear recovery paths.
The earnings call highlights several negative aspects: declining revenues, significant margin compression, and challenges in key markets like Greater China. Despite EPS growth, the lack of guidance and no shareholder return plans further dampen sentiment. The Q&A reveals ongoing inventory issues and promotional pressures, with management providing unclear timelines for resolution. Although there is some optimism in product innovation, the overall outlook is hindered by macroeconomic and internal challenges. Without a market cap, the prediction leans negative due to the breadth of issues discussed.
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