The Beat Came From Washington, Not the Stores
Nike reported fiscal fourth-quarter diluted earnings of $0.72 per share, up from $0.14 a year ago, with net income jumping 407% to $1.1 billion. That looks like a blowout. It was not.
Of that $0.72, a full $0.52 came from the expected recovery of tariffs Nike paid under the International Emergency Economic Powers Act. The Supreme Court ruled those tariffs unauthorized in February, and Nike booked a $986 million recovery this quarter. Take it out and the company earned roughly $0.20 per share.
The same item flattered the margin line. Gross margin rose 890 basis points to 49.2%, and about 900 of those points were the tariff benefit. The underlying margin barely moved.
The Business Is Still Shrinking
Revenue was $11.0 billion, down 1% as reported and down 4% on a currency-neutral basis. Full-year revenue landed flat at $46.4 billion, following a decline the year before.
The mix is the worry. Nike Direct, the company's own stores and app, fell 7%, with digital sales down 12%. Converse dropped 32%. The one bright spot was wholesale, up 4%, as Nike rebuilds the department-store and retailer relationships it spent years walking away from under prior management. That reversal is the core of CEO Elliott Hill's plan, but it is also lower-margin revenue than the direct sales it is replacing.
China Is Still the Hole
Greater China revenue fell 12% to $1.30 billion, and operating profit in the region dropped 20% to $243 million. China has now been a drag for more than a year, and it remains the single biggest gap between Nike today and the growth machine it was.
Hill, who came out of retirement in late 2024 to run the turnaround, has said the company is committed to winning China back but that the results are not there yet. North America is doing the heavy lifting in the meantime, with footwear up 4% and regional profit climbing. Inventories ended the year flat at $7.5 billion, a sign the company has at least cleared the glut that forced heavy discounting a year ago.
What It Means for the Stock
Nike closed near $41, around an 11-year low and about half its 52-week high near $80. The stock sits well below its 200-day average near $58, and the market value has fallen to about $61 billion. The company raised its quarterly dividend again, to $0.41, and returned about $2.5 billion to shareholders over the year, so the income case is intact even as the growth case stalls.
The harder problem is that Nike gave no financial guidance in the release. Without a forward number, buyers are left weighing a slow wholesale recovery against a falling direct business and a China market that keeps sliding. Shares slipped in late trading after the report.
The Forward Look
The real test comes on the earnings call and in next year's results, not in a quarter padded by a tariff windfall. Three things decide whether this is a bottom or another leg down: whether China revenue stops falling, whether digital sales stabilize, and whether the wholesale rebound is big enough to offset the decline in Nike's own channels. Until the underlying business grows without an accounting boost, the tariff refund is a one-quarter story, not proof the turnaround has turned.
