Dive Brief:

• Continued weakness in China, inflationary pressure on consumers and the war in the Middle East contributed to flat sales for sportswear brand Nike in its fourth quarter of 2026, coming as the apparel business struggles to execute an ongoing turnaround strategy.
• Though the company’s results for the quarter ended May 31 fell in line with expectations, the Beaverton, Oregon-based company saw its operating environment become “more challenging” as it progressed through the quarter, CFO Matthew Friend said Tuesday during the company’s earnings call.
• Given continued disruption of oil prices, evolving tariff policies and other headwinds, Nike also does not expect the “volatile” macro environment to “improve meaningfully over the next 6 months,” Friend said, reiterating Nike’s outlook that earnings will remain relatively flat for the beginning of 2027.

Dive Insight:

Analysts cut pricing targets in the wake of Nike’s results, with Morningstar, for example, expecting to reduce its $97 fair value estimate for the company’s shares “by a low-single-digit percentage given the soft near-term outlook,” according to a Wednesday note by senior equity analyst David Swartz.  “However, we think progress will be more apparent in (calendar) 2027 as many products are released and margins improve.”

Nike’s fourth quarter results only added more scrutiny to the progress of CEO Elliot Hill’s “Win Now” plan, implemented upon Hill’s return to the brand two years ago in the face of growing competition in sportswear and continued pressure on margins. Among other efforts, the company announced in April that it would be cutting 1,400 roles in its global operations team, as part of a bid to modernize its tech stack and supply chain, according to a release at the time.

The company is continuing to work on improving its financial standing in key markets such as China, which remains a “critical long-term growth market” for the company, Hill said Tuesday.

“Our teams in China are executing a comprehensive reset, returning to sport and innovation, taking a more local approach to product creation and building a territory level offense,” Hill said. “At the same time, we're reimagining how we operate in the marketplace.”

Both Q4 and full-year revenues were essentially flat year-over-year, with Q4 revenue of $11 billion down 1% from the prior year period, according to the company’s earnings results. Though Nike saw modest growth in North America, those gains were “more than offset” by “expected declines” in Greater China, Europe, the Middle East and Africa, Friend said.  

The company will also soon be under new financial leadership, with Friend set to depart after six years in the top financial seat to be succeeded by Pfizer’s Dave Denton, CFO Dive previously reported.

Denton — who is set to receive a $7.3 million new hire bonus in association with his appointment — will assume the CFO seat effective Aug. 16, according to company filings with the Securities and Exchange Commission. Friend, meanwhile, will leave with a $2 million “lump sum transition benefit,” the company said.

Denton is “just the latest of many executives who have been brought in by Hill since he returned as CEO in 2024,” Swartz wrote in the Wednesday note.  “Although more stability would be preferable, it is not surprising to see changes given Nike's challenges over the past few years.”

In joining the business, the turnround strategy has been in the works for some time, so Denton will “not have to develop something new,” Swartz told CFO Dive via email.

However, the business’ margins are “lower than they should be — even weaker companies like Under Armour have higher gross margins,” Swartz said, noting managing inventory and supply chain is key in this industry.

“Ultimately, Denton needs to manage the business to raise Nike’s gross margins,” he said. “A higher gross margin would have a sizable impact on Nike’s valuation.”  

For its fourth quarter, Under Armour reported a gross margin of 42%, a decline of 350 basis points, citing impacts from higher tariffs, according to its May 12 earnings report.

For the fourth quarter, Nike’s gross margin improved by 890 basis points to 49.2% — a jump primarily due to an expected recovery of tariffs under the International Emergency Economic Powers Act, according to its earnings results. The business recorded a one-time benefit of $986 million related to IEEPA tariffs, collecting over $300 million related to those claims by quarter’s end, according to its earnings call.