Nike Shares Rise on CEO Turnaround
Nike Shares Rise as CEO’s Turnaround Plan Shows Early Signs, But Challenges Remain
Nike’s shares climbed 3.4% in volatile after-hours trading following encouraging first-quarter results, as the company managed to reduce excess inventory and saw its wholesale revenues return to growth. The gains offer an early boost for CEO Elliott Hill’s strategy to restore Nike to its former dominance in the sportswear market.
However, executives cautioned that a full recovery is still some way off.
Nike now expects tariffs to cost the company around $1.5 billion this year, up from the $1 billion projected earlier. Most of Nike’s shoes are manufactured in countries like Vietnam, which have been heavily impacted by U.S. tariffs under President Donald Trump.
Hill, who became CEO last year, has focused on strengthening Nike’s core sports, including running, and on reviving the brand’s reputation for innovative products after a series of weak quarters.
“We’re realistic that we are turning our business around amid cautious consumers, tariff uncertainties, and teams still adjusting to this new sports strategy,” Hill said during a post-earnings call.
In its earnings report, Hill acknowledged that Nike still has “work ahead to get all sports, geographies, and channels on a similar path.”
The company forecasts second-quarter revenue to decline in the low single digits, slightly better than analysts’ expectations of a 3.1% drop. Nike also expects its struggling wholesale business to return to growth in fiscal 2026.
China Challenges Continue
China, Nike’s third-largest market, remains a significant hurdle. The region accounted for 15% of total sales in fiscal 2025, but sales in Greater China fell for the fifth consecutive quarter through August 31. The company faces stiff competition from local brands such as Anta and Li-Ning, as well as younger rivals like On and Deckers’ Hoka.
To boost demand, Nike recently sent U.S. basketball stars LeBron James and Ja Morant to China as brand ambassadors. Hill expects running and basketball to lead growth in the region.
“Nike beat the low bar set for EPS and showed some wholesale strength, but the underlying fundamentals are still shaky. Weak direct-to-consumer sales, margin pressure, and softness in China are warning signs,” said David Bartosiak, stock strategist at Zacks Investment Research.
First-Quarter Surprise
Nike’s wholesale revenue rose 5% on a currency-neutral basis, though tariffs continued to weigh on margins. The company posted first-quarter revenue of $11.72 billion, up 1% from a year earlier and exceeding analyst expectations of $11 billion.
Earnings per share came in at 49 cents, well above the anticipated 27 cents, aided by reductions in inventory levels. However, gross margins fell 320 basis points to 42.2%, following a 440-basis-point drop in the previous quarter.
Matthew Friend, Nike’s Chief Financial Officer, said the company’s direct-to-consumer business is unlikely to return to growth in fiscal 2026, with North America expected to lead the recovery while China continues to lag.
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