Nike (NKE), the athletic apparel and footwear giant is expected to report their May, ’25, (fiscal Q4 ’25) earnings on Thursday night, after the closing bell.
Analyst consensus is expecting $0.12 in earnings per share on $10.7 billion in revenue, for expected y-o-y declines of -88% and -15% respectively.
If you reread the March ’25 earnings preview and earnings summary for Nike (fiscal Q3 ’25), you’ll see that the inventory liquidation that covered both the November ’24 and March 25 quarter’s impacted margins severely.
The point being that inventory liquidation is expected to have come to an end in the May ’25 quarter and Nike should show some progress – albeit small improvement – with the May ’25 release.
The key then will be how Nike guides for Q1 ’26 (ends August ’25), and for the full fiscal ’26 year.
Q1 ’26 consensus: $0.32 in earnings per share on $10.7 billion in revenue (flat sequentially), on operating income of $536 million, for expected y-o-y growth of -54%, -7% in revenue and -56% in operating income.
- If the fiscal Q4 ’25 estimates come in as expected, full-year fiscal ’25 revenue will have fallen 11%, while full-year EPS will have fallen -46%.
- If the full-year ’26 consensus expectations come in as expected, fiscal ’26 revenue will be flat y-o-y, will EPS is expected to grow just 2%.
While fiscal ’26 is an improvement over a murderous fiscal ’25, it’s not much in terms of growth.
- Nike revenue will have declined (on a y-o-y basis) for 5 straight quarters;
- Nike operating income has declined y-oy for 6 of the last 8 quarters;
- Nike EPS has declined y-o-y for 9 of the last 14 quarters;
Positives:
- The biggest positive for me as a shareholder and user of the product, is that Dick’s Sporting Goods has renewed it’s commitment to Nike footwear and is once again devoting ample retail space to the brand. I took a walk through a Dick’s in the western suburbs of Chicago in the last few months, and not only was Nike devoted a lot space in the footwear section, but I saw Nike footwear prominently displayed in some of the sports-specific sections.
- While Nike’s new partnership with Kim Kardashian and Skims is a plus, it’s launch was recently delayed which pushed the stock down from $63 to $60. The fact is Nike is innovating again, and hopefully this is just the first of some new partnerships influencers and athletes.
- Nike’s cash-flow has held-up better than net income. Nike sports a 7% free-cash-flow yield and Nike’s “quality of earnings” has help quite well despite the drop in the stock. Both TTM (trailing twelve-month) cash-flow and free-cash-flow are better than 1x net income.
- The New CEO – Elliott Hill – is a plus.
- Nike first traded down to $70 per share in July ’24, for the past year it’s meandered between $60 and the high $60’s with the exception of the April ’25 flush around Liberation Day. Nike is now oversold on the monthly chart for the first time in it’s history.
The Negatives:
- Nike needs to restore the “energy” of the brand and get the customer coming back into retail for the brand.
- China is a big market for Nike. The tariff issue, on a couple of fronts, could continue to weigh on Nike, and may not be accretive to Nike’s operations for the next few quarters.
Summary / conclusion: The biggest plus for Nike (the stock) after the quarterly earnings next Thursday, is that the stock NOT make a new after earnings. In early April ’25 Nike made a series of lows in the $52 – $53 area during the tariff flush, so a heavy volume trade through $50 would not be a plus.
The 7% free-cash-flow yield, the 2.65% dividend yield and any signs of longer-term improvement, will be a plus for the stock.
It’s shocking that a brand the caliber of Nike could destroy itself like this in a period of 30 months.
Ultimately, I think we (the shareholders) are betting on Elliott Hill to first right the ship and then start to generate “Nike-like” growth in revenue and operating income and earnings per share going forward.
Some improvement this quarter is expected.
None of this is advice or a recommendation, but only an opinion. Past performance is no guarantee of future results.
Thanks for reading.