Nike shares closed Friday at $41.70. The company’s all-time high closing price was $163.63, set on November 5, 2021, meaning roughly three-quarters of the stock’s value has disappeared from its peak.
The shares are also sitting barely above their 52-week low of $40, reached June 26, and far below the $80.17 high set last August.
The reason starts with a strategic decision Nike has spent the past two years trying to reverse. The company pulled back from traditional retailers as it pushed harder into a digital-first, direct-to-consumer model. That opened valuable shelf space for rivals and weakened relationships with stores that had helped Nike dominate athletic footwear for decades.
Now the numbers are showing the reversal.
The Quarter, With the Footnote It Needs
Fourth-quarter revenue was $11.0 billion, down 1% as reported and 4% on a currency-neutral basis.
Wholesale — the channel Nike had deemphasized — climbed 4% to $6.6 billion.
Nike Direct, the channel it had prioritized, fell 7% to $4.1 billion. Digital sales dropped 12%, while Nike-owned stores fell 7%. Converse revenue plunged 32% to $244 million.
That split captures Nike’s turnaround challenge in a few numbers: business is beginning to return through wholesale partners while the company’s own direct channels remain under pressure.
The profit number requires an even bigger qualification.
Quarterly net income jumped 407% to $1.07 billion, with diluted earnings per share of $0.72. But $0.52 of that EPS came from Nike’s expected recovery of tariffs previously paid under the International Emergency Economic Powers Act.
Nike booked a $986 million expected tariff recovery, which added roughly 900 basis points to gross margin. Overall gross margin improved 890 basis points to 49.2%. Without that one-time benefit, the underlying improvement would have looked dramatically different.
For the full fiscal year, revenue totaled $46.4 billion, flat as reported and down 2% currency-neutral. Net income was $3.1 billion and diluted EPS was $2.10, both down 3%.
Wholesale revenue rose 6% to $27.5 billion for the year, while Nike Direct dropped 6% to $17.7 billion. Full-year gross margin improved only 20 basis points to 42.9%.
Nike returned approximately $2.5 billion to shareholders during the year, including $2.4 billion in dividends.
China Is the Deepest Hole
Greater China remains the most difficult part of the turnaround.
Fourth-quarter revenue in the region fell 12% as reported and 17% on a currency-neutral basis to $1.30 billion. Full-year Greater China revenue dropped 11% to $5.85 billion.
Nike is now making another major distribution change there.
Starting in January, its Chinese wholesale partners will no longer be permitted to sell Nike products through their own online channels. Nike will instead concentrate authorized digital sales through its own website and app and official storefronts on Tmall, JD.com and Douyin.
The decision effectively removes more than 1,000 partner-operated digital storefronts from Nike’s online network.
The immediate reaction showed how significant the change is. Topsports, one of Nike’s largest Chinese distributors, said online Nike sales represented about 22% of its revenue and warned of a significant short-term hit. Its shares plunged roughly 24% following the announcement.
The risk is that Nike is again narrowing distribution at a time when competitors are fighting aggressively for shoppers.
Cutting Costs, While Insiders Buy
Nike has also been reducing its workforce and restructuring operations under Chief Executive Elliott Hill’s turnaround effort.
A roughly 1,400-job reduction announced this year has been concentrated heavily in technology as Nike tries to simplify operations and lower costs.
At the same time, several insiders have put their own money into the shares.
Hill purchased 23,660 shares for roughly $1 million. Director Robert Swan bought 11,781 shares for approximately $500,000, while John W. Rogers Jr. purchased 4,000 shares.
Nike is also changing its finance leadership.
David Denton is scheduled to become chief financial officer on August 17, replacing Matthew Friend, who will remain with the company through September 4 to assist with the transition.
Where It Leaves Nike
At $41.70, Nike is trading near the bottom of its one-year range and roughly 75% below the record closing price reached less than five years ago.
Yet this is not a small or disappearing company. Nike still generated more than $46 billion in annual revenue.
The question facing investors is whether Elliott Hill can turn that enormous business back into meaningful growth.
Wholesale is beginning to improve. Direct sales are still falling. China remains deeply troubled. And much of the latest quarter’s spectacular-looking profit increase came from a tariff recovery rather than customers buying more sneakers.
The brand remains enormous.
The comeback has yet to show up clearly in the numbers.
JBizNews Desk | Beaverton, Oregon
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