Nike just gave investors what they desperately wanted to hear. The worst is over.
The athletic giant’s stock exploded 17% Friday after executives convinced Wall Street that their turnaround plan is actually working. Not bad for a company that just posted some truly awful numbers.
Let’s be clear about how bad things were. Sales dropped 12% in the fourth quarter. Net income cratered 86%. Profit margins? They basically evaporated. These aren’t the kind of results you’d expect from the world’s biggest sneaker company.
But CEO Elliott Hill managed to spin disaster into hope during Thursday’s earnings call. His message was simple: We’ve hit rock bottom. Now we climb back up.
“The results we’re reporting today in Q4 and in FY25 are not up to the Nike standard,” Hill admitted on the call. “But as we said 90 days ago, the work we’re doing to reposition the business through our ‘Win Now’ actions is having an impact. From here, we expect our business results to improve. It’s time to turn the page.”
Wall Street bought it. Hard.
Nike shares actually fell when the better-than-feared earnings dropped Thursday evening. Then Hill started talking. By the end of his hourlong pitch to analysts, the stock had jumped more than 10% in after-hours trading.
What changed? Hill delivered specifics about Nike’s comeback strategy. Real details about product launches and partnership wins that convinced skeptical investors this company knows how to fight its way back.
The timing matters. Donald Trump‘s tariff threats have been hanging over Nike like a dark cloud. The company manufactures heavily in China and Vietnam – two countries squarely in Trump’s crosshairs for key Nike manufacturing operations. Hill’s confidence that Nike can weather those headwinds gave investors permission to believe again.
The company is making smart moves. Nike’s return to Amazon after a six-year hiatus shows they’re willing to swallow their pride. They left the platform in 2019 thinking they could go it alone with direct-to-consumer sales. That didn’t work out so well. Now they’re first time since 2019 back where customers actually shop.
Hill also highlighted Nike’s push into women’s retail. They launched in more than 200 women-focused stores during the quarter, including Aritzia. Their collaboration with WNBA star A’ja Wilson sold out in three minutes. That’s the kind of buzz Nike hasn’t generated in a while.
Wall Street analysts woke up Friday morning feeling bullish. HSBC upgraded Nike to buy from hold – their first buy rating on the stock in three and a half years. They set a price target of $80, suggesting 28% upside from Thursday’s close.
“Long in the making but we think the inflection is finally here,” HSBC analyst Erwan Rambourg wrote. “We think there is more than tangible evidence that Nike has a path to see its sales rebound in the not-too-distant future.”
But hold the champagne. This isn’t a victory lap yet.
Nike still expects sales to decline mid-single digits this quarter. That’s roughly in line with Wall Street’s expectation of a 7% drop. The company is still drowning in stale inventory from its classic lines – Air Force 1, Air Jordan 1, and Dunks.
Those classics got crushed in fiscal 2025, with sales falling more than 20% compared to the previous year. In the fourth quarter alone, the decline accelerated to 30%, costing Nike nearly $1 billion in sales impact, according to finance chief Matt Friend.
The inventory problem isn’t going away quickly. Nike is still working to clear out excess Dunk supply, which will pressure profits through the first half of fiscal 2026. Air Force 1 inventory is stabilizing, but barely.
Add Trump’s tariffs to the mix and Nike’s profit margins will stay under pressure for months. Both Hill and Friend expect improvement in the second half of the year, but that’s still a long way off.
When analysts pressed Hill on when Nike might actually return to revenue growth, he wouldn’t bite. “Just because of everything that’s going on, we’re going to take it 90 days at a time,” he said. “We believe full recovery will take time.”
That’s the reality check investors need to hear. Nike is climbing out of a deep hole during uncertain economic times. Consumer sentiment is shaky. Debt levels are rising. Mass deportations and tariffs could slam spending power.
The sneaker giant is trying to rebuild while the economic ground shifts beneath its feet. Friday’s stock surge shows investors believe in the turnaround story.
Whether that optimism pays off depends on Nike’s ability to execute when everything else is falling apart.
