One of the largest sportswear manufacturers, Nike (NKE), has delivered financial results above consensus estimates for the seventh consecutive quarter. However, analysts at Freedom Broker expect a slow recovery in the business and maintain a cautious view on the company’s shares.
Footwear and apparel sales in North America increased, while demand in Europe, the Middle East, and Africa remained weak, including amid geopolitical tensions in the Middle East.
China continues to be the main source of pressure. In Q4, total sales in the region fell 12%, and for the fiscal year revenue remained at $46.4 bn. Over the past five years, Nike’s sales in Greater China have declined by nearly 30%, and, in analysts’ view, a recovery in this market may take a long time.
Financial results were supported by refunds of previously paid import duties. The company received more than $300 mln, and expects to receive another $600 mln in the future. Freedom notes that this factor is one-off in nature and does not change the business’s long-term picture.
Analysts also note that management did not provide an official outlook for fiscal 2027. The leadership does not expect a meaningful improvement in the operating environment over the next six months, which will not allow sales to recover quickly.
What you need to know about Nike
Nike continues to operate under its Win Now strategy aimed at restoring the business’s growth pace. The company is optimizing its operating model, automating processes, and cutting costs. At the beginning of the year, Nike announced a restructuring costing about $300 mln, involving the elimination of 775 jobs, primarily in distribution centers in the U.S. Management expects these measures to improve profitability and speed up product line refreshes.
At the same time, the company is strengthening its marketing position in the global market. In April, Nike held talks with UEFA about supplying official match balls for men’s club competitions starting in 2027. If the agreement is signed, the company will replace Adidas, which has supplied balls for the Champions League, Europa League, and Conference League for about 25 years. The potential contract would allow Nike to strengthen brand awareness and expand its presence in one of the world’s most popular sporting competitions.
Despite the measures being taken, Nike shares remain under pressure. In June, they fell to their lowest levels in 11 years amid weak demand in China, intensifying competition from Adidas and new players, as well as expectations of a slow recovery in profitability.
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