Nike Stock Soars as Turnaround Strategy Gains Momentum and CEO Signals Recovery

Nike Inc. (NYSE: NKE) saw its shares jump more than 9% in U.S. premarket trading on Friday following a stronger-than-expected fourth-quarter earnings report and an optimistic outlook from the company's leadership. CEO Elliott Hill reassured investors that the worst of the financial strain from the company’s ongoing turnaround efforts appears to be over.

“It’s time to turn the page,” Hill declared during the earnings call, signalling a new chapter for the global sportswear giant.

Nike's Financial Performance Beats Expectations

Nike reported Q4 revenue of $11.10 billion, representing a 12% year-over-year decline, yet outperforming analyst forecasts thanks to a stabilising performance in its core running segment, which had struggled amid intense market competition.

In North America, revenue dropped 11% to $4.7 billion, though the decline was less severe than anticipated by Wall Street analysts. Meanwhile, the company's gross margin contracted by 440 basis points to 40.3%, primarily due to steeper discounts and changes in sales channels.

Earnings per share (EPS) landed at $0.14, surpassing analyst expectations of $0.12 per share, according to Investing.com.

Supply Chain Shift to Avoid U.S.-China Tariffs

As part of its broader business transformation, Nike revealed plans to relocate more of its manufacturing operations from China to the United States to minimise exposure to potential U.S. tariff increases.

During the call, CFO Matthew Friend warned that new tariffs introduced under the Trump administration could cost Nike up to $1 billion. Currently, about 16% of Nike footwear imported to the U.S. originates from China, a figure the company aims to reduce to the high single digits by May 2026.

Outlook: Turnaround Pressures Expected to Ease

While Nike anticipates first-quarter revenue to decline by a mid-single-digit percentage, this is still better than the 7.3% drop forecasted by analysts. The company expects the financial drag from its restructuring strategy to begin easing in the coming quarters.

Friend noted that Q4 represented the peak financial impact of Nike’s strategic overhaul and that headwinds are expected to moderate moving forward.

Analyst Confidence Returns

The positive results and forward guidance have prompted HSBC analysts to upgrade Nike’s stock rating to “Buy” from “Hold.” In their note, they suggested that a recovery in sales and margins appears increasingly likely despite ongoing external pressures like tariffs.

“There is now tangible evidence that Nike is on a credible path to restoring sales growth and profitability in the near future,” the note stated.

(Sources: investing.com, reuters.com, ChatGPT)