Just Beat It: Nike Surprises Wall Street With a Win Now Bounce

Nike’s fiscal fourth-quarter earnings report revealed a company in transition, executing on a bold turnaround strategy dubbed “Win Now” under new CEO Elliott Hill. Despite sales dropping 12% year over year and profits plunging 86%, the results beat low expectations on both the top and bottom line. With gross margin contracting less than feared and forward guidance surprising to the upside, shares surged nearly 10% in response. Investors found reasons for optimism in Nike’s progress clearing inventory, stabilizing key product lines, and improving holiday wholesale orders. While the report showed a brand still working through structural challenges, it marked a potential turning point in Nike’s reset story.

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The “Win Now” strategy is designed to reposition the brand by leaning into promotional pricing to clear out underperforming inventory, rebuilding innovation around sport-specific segments, and re-engaging wholesale partners. This quarter marked the deepest financial impact from those efforts, but management emphasized that the heavy lifting is mostly complete. Elliott Hill noted on the earnings call that “the results we’re reporting today… are not up to the Nike standard,” but he stressed that Nike is “turning the page” and expects improvement moving forward.

For the quarter ended May 31, Nike reported revenue of $11.10 billion, down 12% and better than estimates of $10.72 billion. EPS came in at $0.14, ahead of consensus at $0.13, but sharply lower than $0.99 a year ago. Gross margin fell 440 basis points to 40.3%, largely due to heavy discounting and a channel mix shift back toward wholesale. However, operating overhead fell 3% and sports marketing investments rose, a sign that Nike is reallocating spend toward long-term brand health.

Direct-to-consumer (DTC) sales fell 14%, including a 26% drop in digital revenue. Nike-owned store sales were one of the few bright spots, rising 2%. Wholesale revenue, which had been deprioritized under former CEO John Donahoe, declined just 9%, with management noting an uptick in demand ahead of the holiday season. Nike is also re-entering Amazon for the first time since 2019 and launching partnerships with retailers like Aritzia and Urban Outfitters—moves that suggest a more pragmatic approach to distribution going forward.

Geographically, performance was weak across the board, but again, better than feared. North America revenue fell 11% to $4.7 billion, but that topped StreetAccount estimates of $4.42 billion. Greater China, a key area of concern, posted a 21% drop in sales to $1.48 billion, slightly below expectations. Nike acknowledged the recovery in China will take longer due to competitive intensity and lingering inventory issues. EMEA sales were down 9%, Asia Pacific/Latin America fell 8%, and Converse revenue dropped 26%.

From a consumer standpoint, Nike is still operating in a highly promotional environment. The decision to cut prices and lean into clearance channels hurt margins in the near term but helped reset the assortment and generate fresh interest in new launches. Management cited strong response to new running and training lines in North America, and highlighted rapid sell-through of the A’ja Wilson signature shoe, which sold out in minutes. Nike also said it will double inventory for the next launch cycle, signaling increasing confidence in product-market fit.

The company remains exposed to macro headwinds, most notably U.S. tariffs on China imports. CFO Matt Friend estimated that new duties will raise costs by about $1 billion in fiscal 2026, equating to a 75-basis point drag on gross margin for the year. While the tariff hit will be front-loaded, Nike is already shifting its supply chain to mitigate the impact—reducing its China sourcing from 16% of output to a high-single-digit range by next summer, and implementing price increases where appropriate.

Looking ahead, Nike guided for fiscal Q1 revenue to decline by a mid-single-digit percentage, better than consensus estimates for a high-single-digit drop. Gross margin is expected to contract between 3.5 and 4.25 percentage points, including one point of impact from tariffs. While still pressured, this margin outlook is less severe than the 440 basis point compression in Q4. Management did not reinstate full-year guidance but suggested fiscal Q1 should mark a trough in top-line and margin performance.

On the call, Hill emphasized a renewed focus on sport—the so-called “sport offense” strategy. The reorganization will realign Nike, Jordan, and Converse to focus on creating athlete-driven products in key performance categories. This shift away from the lifestyle-heavy approach under Donahoe is meant to reignite innovation and strengthen Nike’s competitive position against upstarts like On Running and Hoka.

While fiscal 2025 will remain challenging, Wall Street appears to be warming to Nike’s story again. Analysts from Piper, Evercore, HSBC, and Needham all raised price targets post-earnings, citing signs of stabilization, innovation pipeline improvements, and the potential for a double-digit margin recovery by fiscal 2027. Piper sees a bull case for $3.00 in earnings power in the outer years, while Evercore sees upside to $2.65 by FY27.

In summary, Nike’s Q4 was far from a clean quarter, but it landed better than feared in nearly every dimension. The combination of improving holiday orders, more realistic guidance, strategic wholesale moves, and early product wins has given the stock fresh momentum. Execution will remain key in the quarters ahead, especially on inventory and margin recovery. But for now, sentiment is shifting, and Elliott Hill’s “Win Now” plan appears to be taking root—just in time for Nike to lace up for the long game.