Nike Opens at a Decade-Plus Low
Nike's stock opened at its lowest level in over a decade, capping a difficult stretch for the company. The shares have been under sustained pressure because the anticipated turnaround is taking considerably longer than the market expected. Despite the grim longer-term picture, the stock was actually higher on the day of this discussion — up roughly 3% to 3.5% — following an earnings report delivered the prior afternoon that drew heavy attention from the sell side.
The overall read on the results was mixed: it wasn't great, but it wasn't as bad as it could have been. There were genuine things to like, alongside real concerns. Notably, the criticism this time was less pointed than in prior quarters regarding how long the turnaround strategy is dragging on. There were bright spots, but the company is not out of the woods.
The Earnings Numbers
Nike posted earnings and revenue that topped expectations, even while seeing another sales decline in China — a key market and a central part of its turnaround plan.
Earnings per share. On an adjusted basis, EPS came in at 20 cents a share, against an expected range of 11 to 13 cents — a beat either way. The originally reported figure was 72 cents, but 52 cents of that came from a one-time $986 million tariff refund tied to the AIPA tariffs being struck down. Stripping out that 52-cent contribution still leaves a beat at 20 cents, just a less dramatic one.
Revenue. Revenue came in just under $11 billion, versus an expectation of $10.86 billion. That figure was down 1% year-over-year but still better than the Street anticipated.
Initial reaction. Nike initially dropped on the numbers, driven by the weakness in China.
Bright Spots
Several positives emerged in the report:
- Gross margin increased 8.9% during the quarter, largely thanks to the tariff refund that also drove the boost in EPS.
- The company collected $300 million of cash related to its tariff refund claims.
- North America, Nike's largest market, climbed 3% to $4.83 billion. Depending on the metric and consensus used, this either slightly missed or came in line with expectations — but it represents an improvement in the company's key market and a signal that the turnaround plan is at least not failing. Leadership had earlier described the recovery as "linear," and it's worth stressing that a huge growth surge was never the expectation here.
The China Problem
China remains the central concern. Sales in greater China dropped 12% to $1.3 billion. Even so, that was better than the Street's expectation of roughly $1.24 billion.
CEO Elliot Hill said he is committed to winning the China market back and acknowledged the shortfall directly, stating: "Overall, the results aren't there yet. We know we're not living up to our full potential, particularly in Nike sportswear and Jordan streetwear, where sell-through remains challenged, impacting both current discounting and future order books."
Guidance and the Outlook
The company offered a cautious outlook:
- It expects earnings to be roughly flat through the first two quarters of fiscal 2027 — the two quarters immediately ahead.
- It expects gross margins for the fiscal quarter to be slightly positive.
- It warned about elevated consumer anxiety weighing on sales, which added to investor concerns.
The World Cup as a Growth Lever
A meaningful source of optimism came from the World Cup. Although Nike is not an official sponsor, its advertising is massively outpacing Adidas, it is gaining significant traction on social media, and it has already sold more than double the tournament-related merchandise it had at the same point ahead of the 2022 event.
Elliot Hill said it "feels different this time" because the company is not treating the tournament as a single moment. Instead, Nike is using the World Cup to reshape its business — engaging different communities, enhancing its audience and reach, and trying to build momentum that carries beyond the tournament. This durability angle may be part of what lifted the stock. The same China worries also weighed on European peers, with Adidas and Puma trading lower in the European session.
The Sell-Side Reaction
Despite the pop in the stock, analysts were not especially optimistic, and a wave of price-target cuts followed. Most maintained neutral-leaning ratings:
- Citi lowered its target to $45 from $47 — a $2 adjustment — keeping a neutral rating, describing the outlook as weaker sales but stronger margins, and calling it a complex turnaround.
- Wells Fargo cut its target to $40 from $45, keeping an equal-weight rating, saying top-line pressures have worsened and will persist, visibility is low, and global headwinds make the timing of the turn extremely hard to predict.
- Barclays lowered its target to $52 from $67, but kept an overweight rating.
- Bank of America cut its target to $47 from $55.
- Piper Sandler dropped its target to $45 from $50.
The consensus takeaway: everyone is keeping an eye on the turnaround plan. The quarter wasn't as bad as it could have been, but it wasn't as good as people wanted.
Trading the Stock: An Options Idea
From a trading perspective, this has been a difficult stock. Earlier in the session there was very little reaction — the stock was down slightly — before climbing about 3%. It is rare for Nike not to move in the days following earnings, which sets up a volatility-driven approach.
The original trade idea was a strangle using the July 17th expiration: buying the 40 put and buying the 42 call, at a cost of $1.75 at the time. Because the stock had since moved sharply to the upside, a fresh position would instead use the 40 put and the 43 call, costing somewhere around $1.50. The rationale: Nike is expected to make a decent move over the next several weeks, and for this position it doesn't matter whether that move is up or down — the strangle profits from a large move in either direction.
Bottom Line
Nike delivered a beat that flattered the headline numbers via a one-time tariff refund, showed encouraging stabilization in North America, and pointed to World Cup momentum as a longer-term catalyst — but persistent weakness in China, cautious guidance, and warnings about consumer anxiety kept the market and analysts skeptical. With the stock near 12-year lows and price targets falling across the board, investors are still waiting for a convincing "Just Do It" moment that signals the turnaround has truly taken hold.
