What Management Said
Read the full Q4 2025 transcript ↗Please refer to NIKE's earnings press release or NIKE's website, investors.nike.com, for comparable GAAP measures and quantitative reconciliations. All growth comparisons on the call today are presented on a year-over-year basis and are currency neutral unless otherwise noted. We also set out to aggressively right-size three very important franchises: Air Force 1, Dunk, and the AJ1, and to return NIKE Digital to a premium destination. These sport-obsessed teams will create greater dimension and distinction for our three brands, will make us more competitive, and will accelerate our growth.
We'll invest in NIKE Direct digitally and physically and thoughtfully segment wholesale partners to serve sport-specific consumers across channels and up and down price points. Take NIKE running as an example, which grew high single digits overall for the quarter. In basketball, our women's business expanded more than 50% this fiscal year, proving that product demand is catching up to the spike in energy surrounding the women's game. While we have a ways to go to return to a truly diversified sportswear lineup at scale, I'm pleased with the progress the team is making.
As we put the sport offense in place, we're building a full pipeline of innovative product and driving momentum in the marketplace. In fiscal 2025, we reclaimed our identity through sport and implemented the win now actions to reposition our brands and business for future growth. We expect the headwinds to revenue and gross margin to begin to moderate from here. Last, I will provide guidance for the first quarter of fiscal 2026, as well as additional insight for how we expect win now to shape our financial performance over the next fiscal year.
What went well
- Nike running grew high single digits for the quarter, led by the Vomero 18, which became a $100 million-plus franchise in just over 90 days with strong sell-through and growth across all geographies.
- The women's basketball business expanded more than 50% for the fiscal year, and A'ja Wilson's first signature shoe, the A'One, sold out in three minutes on Nike Digital in North America at its first launch.
- Wholesale momentum built through cleaner channels and a holiday order book that is up, with North America, EMEA, and APLA growth only partially offset by Greater China.
- Nike Direct showed early signs of becoming a more premium destination, with North America improving Digital markdown rates and a higher share of full-price demand, and EMEA delivering a double-digit increase in full-price demand share.
- The company made progress diversifying sportswear, with EMEA sportswear growing overall in wholesale and women's sportswear footwear returning to growth, plus strength in look-of-running products like P-6000, Vomero 5, and Shox.
- Distribution expanded through new partners including a Gen Z experience with Urban Outfitters, entry into over 200 women's-led doors, and a new Amazon partnership launching in the fall.
What went wrong
- Fourth quarter revenue declined 12% on a reported basis and 11% currency-neutral, with full-year revenue down 10% reported, results management described as not up to the Nike standard.
- Gross margin declined 440 basis points to 40.3% due to higher wholesale discounts, higher Nike factory store discounts, supply chain cost deleverage, and channel mix headwinds.
- Nike Digital declined 26% in the quarter as the channel was repositioned and demand creation pressured profitability.
- Greater China revenue declined 20% with EBIT down 45%, as traffic remained challenged and the marketplace required a deeper inventory reset on a longer timeline than other geographies.
- Classic footwear franchises declined more than 30% in Q4, representing almost a $1 billion headwind to revenue, and inventory remained elevated despite being flat versus the prior year.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Revenue | Q1 FY2026 | Down mid-single digits (Improvement from Q4's 11% currency-neutral decline) |
| Gross margin tariff impact | FY2026 | Approximately 75 basis points net headwind (Greater impact in the first half; 100 bps in Q1) |
| Gross incremental tariff cost | FY2026 | Approximately $1 billion gross (To be fully mitigated over time) |
| China footwear sourcing into U.S. | End of FY2026 | High single-digit range (Reallocated to other countries) |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Q4 revenue | Down 12% reported, down 11% currency-neutral | Largest financial impact from Win Now actions, including managing down classic franchises and cleaning the marketplace |
| Gross margin | Down 440 bps to 40.3% | Higher wholesale and factory store discounts, supply chain deleverage, and channel mix headwinds |
| Nike Direct | Down 14% (Digital down 26%, Stores up 2%) | Repositioning Nike Digital to a full-price premium model and reducing promotional activity |
| Greater China revenue | Down 20% | Deeper inventory reset, challenged traffic, and a monobrand marketplace on a longer recovery timeline |
| Classic footwear franchises | Down more than 30% | Aggressive right-sizing of Air Force 1, Dunk, and AJ1, a near $1 billion revenue headwind |
| Effective tax rate | 33.6% vs 13.1% prior year | Decreased benefits from stock-based compensation and one-time items |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Win Now actions | Implementing five actions across culture, product, marketing, marketplace, and ground game | Q4 reflected the largest financial impact; headwinds expected to moderate from here | Progressing, impact peaking |
| Sport Offense reorganization | Men's, women's, kids construct | Realigning into cross-functional teams by sport across Nike, Jordan, and Converse | Newly announced, beginning |
| Classic franchise reduction | FY2025 declines of more than 20% | Q4 declines accelerated to more than 30% | Accelerating headwind, focused on first half fy2026 |
| Wholesale relationships | Promotional, strained marketplace | Holiday order book up; partners investing behind newness | Improving |
| Tariffs | Mid-teens average duty rate on U.S. footwear imports | New tariffs add approximately $1 billion gross cost, 75 bps net FY2026 margin impact | New structural headwind |
Q&A Summary
Can you elaborate on the accelerated Sport Offense realignment and the phasing of innovation into the back half of FY2026, plus the cadence of revenues this year?
Hill said the company is organizing into sport-obsessed teams to drive a relentless flow of innovative product across all three brands, citing running up high single digits, the Vomero $100 million franchise, and strong performance products. Friend said Q1 revenue down mid-single digits reflects continued classic franchise headwinds and inventory liquidation offset by an improved order book, with franchise headwinds concentrated in the first half.
Is the continued first-half marketplace cleanup consistent with prior plans, and on tariffs, does the Q1 impact simply reflect time for mitigation efforts to take hold?
Friend confirmed inventory remains on track with no change versus 90 days ago, with North America and EMEA furthest along and inventory quality improved. On tariffs, he agreed the larger Q1 impact reflects mitigation actions being implemented at different points through the year, landing at a 75 basis point full-year gross margin impact.
Are you expecting gross margin pressures to abate sequentially, and is there an opportunity to return margins to growth in the back half?
Friend said margins will remain under pressure in the first half from Win Now actions and tariff timing, then moderate in the second half. He framed FY2026 margins around three dynamics: short-term product and channel mix headwinds, the transitory Win Now impact concentrated in the first half, and the newly implemented tariffs at 75 bps for the year and 100 bps in Q1.
Given wholesale is the largest driver and you're seeing order growth, are there scenarios where you could return to total growth this year?
Hill said the path to sustainable profitable growth is through the Win Now actions and Sport Offense, citing positive signals in order book, sell-through, inventory, and digital, but noted each geography is at a different stage and the company will take it 90 days at a time because full recovery will take time.
What is the opportunity to drive full recovery in China, and the timeline and competitive environment?
Hill said Nike believes in the long-term China opportunity with structural tailwinds and the chance to bring 1.3 billion consumers into sport, but China is on a different timeline due to its monobrand structure. The team is cleaning up the marketplace, elevating digital, leveraging the Geo Express Lane for China-specific product, and resetting retail concepts, though changes will take time.
Structurally, is there any reason this should not be a double-digit margin business once these actions clear?
Friend said Nike has consistently been a double-digit margin company regardless of business size or portfolio composition and believes that remains a worthy goal, with the path being a return to sustainable organic revenue growth, recovery of transitory impacts, and disciplined expense management. Hill added that over time Nike absolutely has the ambition to return to double-digit operating margins.
More on NIKE, Inc.
Reported 2025-06-26 · figures from the NIKE, Inc. Q4 2025 earnings call.
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