The situation: Nike’s turnaround will likely take some time. In FYQ4, the company’s sales fell 12% YoY (11% on a constant-currency basis), reflecting what CFO Matthew Friend called the “largest financial impact” from the company’s reset strategy. Still, he expressed confidence that “headwinds will moderate from here,” emphasizing Nike’s focus on execution and controlling what it can.

Key to that strategy is its shift back to wholesale. After years of emphasizing direct-to-consumer under former CEO John Donahoe, Nike is now rebalancing its approach. That pivot was evident in the company’s FYQ4 numbers:

• Nike Direct revenues fell 14% YoY to $4.4 billion.
• Wholesale revenues dropped 9% to $6.4 billion.

Other Q4 highlights:

• Earnings per share were 14 cents, down 86% YoY, but slightly above the expected 13 cents.
• Revenues came to $11.10 billion, down 12% YoY, but ahead of the expected $10.72 billion.
• Gross margin fell 440 basis points to 40.3%.

Looking ahead: While Nike believes it’s turned a corner, plenty of hurdles remain, including:

• Tariff pressure on China-made goods
• Production delays, including the postponed NikeSKIMS launch
• Margin erosion from its reliance on discounts to offload inventory from its retro lines
• Weakening demand in China, which was once a critical growth engine

Our take: Turning around a company the size of Nike is like trying to turn around an ocean liner in rough waters. Change takes time, especially amid headwinds like tariffs and shaky demand, and execution missteps keep dragging on performance. Nike is adjusting course—leaning back into wholesale, cleaning up its inventory, and getting more surgical with product drops—but calm seas are still a ways off.

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