Nike (NKE) is gradually recovering sales, but weak demand in China continues to weigh on the company’s results. After the earnings report for fiscal 2026 Q4, Freedom analysts lowered the stock’s target price from $60 to $54 and maintained a “Hold” rating. In their view, the return of sales growth will be slower than previously expected.
Nike revenue beat expectations in fiscal 2026 Q4
Nike’s Q4 revenue totaled $10.97 bn, down 1% year over year but above the consensus forecast of $10.85 bn. Excluding currency fluctuations, the decline was 4%. Wholesale revenue increased 4% to $6.6 bn, while direct sales fell 7% to $4.1 bn. For the full fiscal 2026 year, Nike generated $46.4 bn in revenue—virtually unchanged from the prior year.
Footwear sales for the quarter declined 1.1% year over year, while apparel sales rose 1.5%. A more noticeable improvement was seen in North America: footwear sales increased 4% and apparel rose 1%. For the full year, footwear sales in the region grew 5%.
This suggests early signs of a recovery in the footwear segment, although the improvement is occurring against a low comparison base. Additional support is coming from running shoes: this business has posted double-digit growth for five consecutive quarters and has increased by roughly $1 bn over that period.
China remains Nike’s key weak market
China remains the main source of risk. In Q4, Nike sales in the region fell 12% year over year, and by 17% in constant currency. Footwear sales dropped 13% and apparel sales declined 10%. For the full fiscal year, China revenue fell 11% to $5.85 bn.
Over the past five years, Nike’s sales in Greater China have decreased by nearly 30%, so a full recovery may take a long time. At the same time, the region’s share of the company’s total sales has fallen to about 14%, limiting its impact on overall business dynamics.
Problems are also evident in EMEA—the region comprising Europe, the Middle East and Africa. Q4 sales declined 1% year over year and 6% excluding currency effects. Direct sales fell 16% and digital sales dropped 24%. The region’s performance was influenced, among other things, by the situation in the Middle East.
Nike is betting on the premium segment instead of price competition
Nike’s strategy is also changing. The company is shifting its brand positioning toward the premium segment and reducing discounts. At the same time, Nike is modernizing its retail network: renovated stores are showing better results, while underperforming locations are slated for optimization. In the second half of the year, Nike Sportswear plans to introduce more than ten new shoe models.
At the same time, the company is not seeking to compete aggressively for lower-income consumers through cheaper offerings. This creates risk amid pressure on the budgets of such households and intensifying competition from more affordable brands. Analysts note that Nike continues to cede some market share to them and is focusing on professional sports and premium positioning.
Tariff refunds sharply boosted Nike profit, but the effect is one-off
The quarter’s financial results received substantial support from a refund of previously paid tariffs under IEEPA. Nike recognized refund income of $986 mn, of which more than $300 mn has already been received, with the remaining amount recorded as accounts receivable.
As a result, gross margin in Q4 jumped by 8.9 percentage points to 49.2%. Gross profit increased 21% to $5.39 bn. Net income reached $1.07 bn versus $211 mn a year earlier, and diluted EPS was $0.72. However, excluding the tariff refund effect, adjusted EPS was $0.20—above the consensus estimate of $0.12 but well below the reported figure.
Therefore, the improvement in profitability cannot be fully extrapolated to the next quarters: a significant share of the increase was driven by a one-time factor.
Nike has yet to provide clear guidance for fiscal 2027
Uncertainty also remains around fiscal 2027. The company has not yet presented official annual guidance. For the next quarter, management allows for a revenue decline of a few percent excluding currency effects and neutral profit dynamics. Management does not expect a meaningful improvement in the operating environment over the next six months.
After the earnings release, investor reaction was mixed: an initial decline in the share price of about 3.3% was followed by a rise in the next trading session. At the same time, the stock remains under strong long-term pressure: in late June it fell to its lowest level since 2014, and it has lost about 78% from its 2022 all-time high.
Why Nike’s target price is $54
Analysts expect a slow return of Nike’s sales to a growth trajectory. Positive factors include recovering demand for footwear, strong positioning in running, brand premiumization, reduced discounting, and the company’s continued strong financial position.
However, a rapid recovery may be hindered by the ongoing decline in sales in China, weakness in the EMEA market, intense competition, pressure from cheaper brands, and the absence of clear management benchmarks for fiscal 2027. Key risks also include China’s macroeconomic environment, currency fluctuations, and customs duties.
Given these factors, Nike’s target price is set at $54, with a “Hold” recommendation. The valuation is based on a five-year DCF model using the FCFF method.
Nike is trying to regain ground amid intensifying competition
In late June, Freedom wrote about Nike shares falling to an 11-year low. The stock was pressured by problems in the Chinese market and intensifying competition from Adidas and younger sports brands, including On Holding.
At the same time, Nike is restructuring its business and trying to return sales growth. The company is optimizing its operating model, automating processes, and cutting costs. As part of the Win Now strategy, Nike is also refreshing its product lineup and strengthening the brand’s position in professional sports.
In April, the company held talks with UEFA about supplying official balls for men’s club competitions starting in 2027. If an agreement is reached, Nike could replace Adidas, which has partnered with Europe’s largest club competitions for about 25 years.
In early August, Freedom also analyzed Nike’s long-term financial prospects. It forecast a gradual revenue recovery after the downturn and improved profitability by 2030.
This is not an individual investment recommendation.