What factors drive NKE's earnings surprises?

Nike's recent earnings surprise of $0.25 per share, reported for the fiscal quarter ending December 31, 2024, can be attributed to several key factors:

1. **Revenue Decline**: Nike's revenues fell by 8% on a reported basis and 9% on a currency-neutral basis, amounting to $12.4 billion. This decline was primarily driven by decreased sales across all geographies, with Nike Direct revenues dropping 13% and wholesale revenues decreasing 3%.
2. **Margin Compression**: The company's gross margin decreased by 100 basis points, reaching 43.6%. This reduction was likely a result of inventory markdowns, which Nike implemented to clear excess inventory, particularly in its less profitable channels.
3. **Strategic Initiatives**: Nike is in the process of implementing a turnaround strategy aimed at restoring long-term shareholder value. These initiatives include refocusing on its core sportswear business and rebuilding relationships with wholesale partners, efforts that are expected to have both short-term and long-term impacts on financial performance.

In summary, Nike's earnings surprise is primarily driven by a combination of revenue decline and margin compression, which are part of the strategic initiatives aimed at restoring long-term shareholder value.