NIKE (NYSE: NKE) posted Q4 diluted EPS of $0.72, a 414% jump from $0.14 a year ago and far past the $0.12 consensus estimate. The headline number is almost entirely a tariff story. A $0.52 per-share benefit from the expected recovery of IEEPA tariffs drove the vast majority of the beat. Strip that out, and underlying EPS was roughly $0.20—still above the estimate but far less dramatic.
Revenue for the quarter ended May 31 came in at $11.0 billion, down 1% on a reported basis and 4% currency-neutral. That beat the $10.85 billion consensus, but the composition matters more than the top-line number. NIKE Direct, the company's owned-channel business, fell 7% reported (down 9% currency-neutral), with digital sales dropping 12% and owned-store sales declining 7%. Wholesale, by contrast, grew 4% reported (up 1% currency-neutral), driven by North America. The channel mix shift is telling: NIKE's retail partners are taking more inventory even as the company's own stores and website lose traffic.
Gross margin expanded 890 basis points to 49.2%. That expansion was almost entirely artificial. The expected recovery of IEEPA tariffs contributed approximately 900 basis points. Without that benefit, gross margin would have been roughly flat to down year-over-year, as cost of sales fell 16% largely due to the tariff reversal. The underlying margin story is one of stability, not expansion.
Regionally, North America was the bright spot. NIKE Brand revenue there rose 3% reported (3% currency-neutral). Footwear grew 4%, apparel 1%. That strength was offset by a 12% decline in Greater China (down 17% currency-neutral), where footwear fell 13% and apparel dropped 10%. EMEA was down 1% reported (down 6% currency-neutral). The China weakness is structural, not cyclical. NIKE has been losing share to local competitors like Anta and Li-Ning, and the double-digit decline suggests the trend is accelerating rather than stabilizing.
Converse continues to be a drag. Revenue fell 32% reported (down 34% currency-neutral), with declines across all territories. The brand contributed just $244 million in Q4 revenue, down from $357 million a year ago. Converse EBIT was $23 million, down 15%. At this pace, the brand is approaching irrelevance within NIKE's portfolio, though the absolute dollar impact on the parent is modest.
The full-year picture reinforces the Q4 narrative. FY2026 revenue was flat at $46.4 billion (down 2% currency-neutral). Gross margin improved just 20 basis points to 42.9%, and net income declined 3% to $3.1 billion. The company returned $2.5 billion to shareholders, including $2.4 billion in dividends and $123 million in share repurchases. The buyback pace is modest relative to the $18 billion authorization, suggesting management is conserving cash rather than aggressively retiring shares.
Management's commentary was measured. CEO Elliott Hill cited "meaningful structural improvements" and progress in performance product, while CFO Matthew Friend noted that "sell-through remains challenged" and that the company is "adjusting operating costs for greater efficiency." No guidance was provided, consistent with NIKE's practice, but the absence of any forward-looking commentary on demand trends is notable. The company is clearly in a transition phase, investing in product and brand while managing costs. The top-line headwinds are real and persistent.
The tariff recovery is a one-time event. The $986 million benefit recognized in Q4 will not repeat. What matters for FY2027 is whether NIKE can stabilize NIKE Direct, reverse the China decline, and demonstrate that the wholesale growth is sustainable rather than a channel shift that pulls forward demand. The Q4 print shows a financially disciplined company still searching for a growth catalyst. The beat is real on paper, but the underlying business is not yet turning.