Company Reports

Nike opened fiscal 2027 with a 4% sales decline. Gross margin rose 60 basis points to 42.8% on lower logistics costs, and selling, general, and administrative expenses fell 3% as expense control offset higher sports-related marketing. Shares fell by a high-single-digit rate in postmarket trading.

Nike has confirmed that, as of January, it will restrict its franchise partners in China from selling its products through digital channels. By doing so, Nike will limit e-commerce in the nation to official company-operated e-commerce and stores on major platforms Tmall, Douyin, and JD.com.

We view Nike as the leader of the athletic apparel market and believe it will recover from its recent problems, which have included lackluster product development, soft demand for sportswear, and strained relationships with wholesale accounts. Our wide moat rating is based on its intangible brand asset, as we believe it will maintain premium pricing and generate economic profits for at least 20 years. With global visibility through its many sports sponsorships, Nike is the largest athletic footwear brand in all major categories and in most markets. The firm faces significant competition, but we believe it has proven over a long period that it can maintain share and pricing.

We view Nike as the leader of the athletic apparel market and believe it will recover from recent problems, including lackluster product development, soft demand for sportswear, and strained relationships with wholesale accounts. Our wide moat rating is based on its intangible brand asset, as we believe it will maintain premium pricing and generate economic profits for at least 20 years. With global visibility through its many sports sponsorships, Nike is the largest athletic footwear brand in all major categories and in most markets. The firm faces significant competition, but we believe it has proven over a long period that it can maintain share and pricing.

Nike's sales fell 1% in the fourth quarter of fiscal 2026, as a 12% decline in Greater China (11% of total) offset a 3% rise in North America (44%). Operating expenses fell 2% on reductions in marketing and administrative costs. Excluding a tariff refund, EPS rose to $0.20 from $0.14 last year.

We view Nike as the leader of the athletic apparel market and believe it will recover from recent problems, including lackluster product development, soft demand for sportswear, and strained relationships with wholesale accounts. Our wide moat rating is based on its intangible brand asset, as we believe it will maintain premium pricing and generate economic profits for at least 20 years. With global visibility through its many sports sponsorships, Nike is the largest athletic footwear brand in all major categories and in most markets. The firm faces significant competition, but we believe it has proven over a long period that it can maintain share and pricing.

Nike had flat sales in fiscal 2026's third quarter as 3% growth in North America (45% of sales) was offset by challenges elsewhere. Its gross margin fell 130 basis points to 40.2% on higher tariffs, and its operating margin dropped to 4.9% from 7% due, primarily, to layoff-related severance costs.

We view Nike as the leader of the athletic apparel market and believe it will recover from recent problems, including lackluster product development, soft demand for sportswear, and strained relationships with wholesale accounts. Our wide moat rating is based on its intangible brand asset, as we believe it will maintain premium pricing and generate economic profits for at least 20 years. Nike is the largest athletic footwear brand in all major categories and in most markets. While it does face significant competition, we believe it has proven over a long period that it can maintain share and pricing.

Nike's fiscal 2026 second-quarter sales edged up 1% as 9% growth in North America (45% of total) offset a steep 17% decline in Greater China (12%). Due to higher tariffs, Nike's gross and EBIT margins both declined about 3 percentage points to 40.6% and 8.1%, respectively. Overhead expenses fell 4%.

We view Nike as the leader of the athletic apparel market and believe it will recover from its recent problems, such as a lack of product innovation, soft demand for sportswear, and strained relationships with wholesale accounts. Our wide moat rating is based on its intangible brand asset, as we believe it will maintain premium pricing and generate economic profits for at least 20 years. Nike is the largest athletic footwear brand in all major categories and in most markets. While it does face significant competition, we believe it has proven over a long period that it can maintain share and pricing.

Nike overcame a 9% sales decline in Greater China (13% of total) to post 1% growth in fiscal 2026's first quarter. Its gross margin fell 320 basis points to 42.2% due to higher markdowns and tariffs, and led to an EBIT margin that declined to 7.7% from 10.9% despite a 1% cut in operating costs.

We view Nike as the leader of the athletic apparel market and believe it will recover from its recent problems, such as a lack of product innovation, soft demand for sportswear, and strained relationships with wholesale accounts. Our wide moat rating is based on its intangible brand asset, as we believe it will maintain premium pricing and generate economic profits for at least 20 years. Nike is the largest athletic footwear brand in all major categories and in most markets. While it does face significant competition, we believe it has proven over a long period that it can maintain share and pricing.

Nike's sales plummeted 12% in its May-ended fiscal 2025 fourth quarter, as it continues to work through excess inventory. Its EBIT margin of 2.7% was down from 12.3% in the prior year, and its earnings per share fell to $0.14 from $0.99.

The Trump administration announced tariffs on imports to the US that are materially higher than had been expected. This policy has significant implications for apparel manufacturers and retailers as, according to trade associations and other sources, approximately 98% of clothing and 99% of footwear that is sold in the US is imported, primarily from Asia. Indeed, according to the United States Fashion Industry Association, about 60% of US apparel is supplied by just three Asian countries: China, Vietnam, and Bangladesh. These three nations were hit extremely hard by the new policy, as tariff rates were set at 54% for China, 46% for Vietnam, and 37% for Bangladesh. High tariffs were imposed on most other key apparel-sourcing countries in Southeast Asia as well.

We view Nike as the leader of the athletic apparel market and believe it will recover from its recent problems, such as a lack of product innovation, soft demand for sportswear, and strained relationships with wholesale accounts. Our wide moat rating is based on its intangible brand asset, as we believe it will maintain premium pricing and generate economic profits for at least 20 years. Nike is the largest athletic footwear brand in all major categories and in most markets. While it does face significant competition, we believe it has proven over a long period that it can maintain share and pricing.

Although wide-moat Nike reported large declines in sales and earnings in third-quarter fiscal 2025 (ended February), its results were better than expected and new CEO Elliott Hill outlined a solid plan to get the firm back on track. His “win now” plan includes actions to grow through wholesale partnerships, use e-commerce as a premium channel, increase product innovation, and strengthen ties to sports. The strategy is being implemented in all of Nike’s key regions. It will require some significant inventory cleanup and is unlikely to pay immediate dividends in a tough global sportswear market, but we had already anticipated this in our model. Thus, we do not expect to make any material change to our $112 fair value estimate and think there is an opportunity for patient investors. After an initial spike on the earnings report, Nike’s shares fell 5% during March 20 postmarket trading, likely due to the dim near-term outlook.

We view Nike as the leader of the athletic apparel market and believe it will recover from its recent problems, such as a lack of product innovation, soft demand for sportswear, and strained relationships with wholesale accounts. Our wide moat rating is based on its intangible brand asset, as we believe it will maintain premium pricing and generate economic profits for at least 20 years. Nike is the largest athletic footwear brand in all major categories and in most markets. While it does face significant competition, we believe it has proven over a long period that it can maintain share and pricing.

We rate Nike as very undervalued relative to our $112 per share fair value estimate. Amid one of its most challenging periods in decades, its shares fell nearly 30% in 2024, but we believe new CEO Elliott Hill is making the right moves to bolster its brand value, which is the source of our wide moat rating. Hill's general plan is to invest in the firm's connections to global sports, which we regard as the firm's greatest advantage, while cutting costs elsewhere. In the long run, we think Nike can return to midteens EBIT margins as it increases full-price selling, releases new merchandise, and increases sales in high-margin markets.

Although Nike reported second-quarter sales and earnings above expectations, it was a generally poor result by its usual standards. Moreover, the outlook for the rest of fiscal 2025 is dismal as CEO Elliott Hill, on the job since October, intends to increase discounting to clear inventory ahead of new product releases in fiscal 2026. We expect to cut our $117 per share fair value estimate by a mid-single-digit percentage on the results and guidance, but regard Nike’s shares as very undervalued. Our wide moat rating on the firm is based on its brand intangible asset, and we believe Hill is making the right moves to bolster its brand value. His general plan is to invest in Nike’s connections to global sports, which we regard as the firm’s greatest advantage.

We view Nike as the leader of the athletic apparel market and believe it will recover from its recent problems, such as a lack of product innovation, soft demand for sportswear, and a CEO change. Our wide moat rating is based on its intangible brand asset, as we believe it will maintain premium pricing and generate economic profits for at least 20 years. Nike, the largest athletic footwear brand in all major categories and in most markets, dominates areas like running and basketball with popular shoe styles. While it does face significant competition, we believe it has proven over a long period that it can maintain share and pricing.