NIKE, Inc. Q4 FY2025 earnings call

• Elliott Hill reflected on Faith Kipyegon's Breaking4 attempt and emphasized NIKE's expertise, ambition, and inspiration for athletes.
• Outlined Win Now actions including culture, product, marketing, marketplace, and ground game, with a focus on key sports, countries, and cities.
• Announced realignment into sport offense teams to have deeper athlete relationships, drive sports-specific innovation, and differentiate brands by sport.
• Highlighted distribution expansions, such as partnership with Amazon, and successful sport moments across brands like NIKE, Jordan, and Converse.
• Discussed product portfolio progress, including growth in running, women's basketball, and sportswear, and plans for fiscal year '26 including new product pipelines for various sports.

In Fiscal 2025 Fourth Quarter, North America Q4 revenue declined 11%, with NIKE Direct down 14% and Wholesale down 8%. EMEA Q4 revenue declined 10%, NIKE Direct down 19% and Wholesale down 4%. Greater China Q4 revenue declined 20%, NIKE Direct down 15% and Wholesale down 24%. APLA Q4 revenue declined 3%, NIKE Direct down 1% and Wholesale down 5%. Product-wise, NIKE running grew high single digits, women's basketball business expanded over 50% in FY '25, Vomero 18 became a $100 million-plus franchise, A'ja Wilson's Signature Collection sold out quickly, and sportswear like P-6000, Vomero 5, and Shox showed strength.

• Q1 revenues expected to be down mid-single digits.
• Q1 gross margins expected to be down approximately 350 to 425 basis points, including ~100 basis points negative impact from new tariffs.
• Q1 SG&A dollars expected to be up low single digits.
• Tax rate for full year expected to be 19% to 20%.
• For fiscal '26, expect margins to moderate in second half, with ~75 basis point impact on gross margin net of actions, and holiday order book improving sequentially.

• Geopolitical volatility and tariff uncertainty affecting sourcing, costs, and consumer pricing.
• Inventory challenges, including elevated inventory levels in some geographies despite progress.
• Impact of new tariffs on gross margin, with initial larger impact in Q1 and a 75 basis point full-year impact.

Q: Could you elaborate on the accelerated actions under your sport offense realignment and speak to the phasing of innovation into the back half of FY '26?

A: Elliott Hill discussed organizing into sport-obsessed teams to drive innovative product across brands, with examples like running (Vomero 18 and upcoming models), training (MetCon and 24/7 Apparel Collection), basketball (signature athletes), and global football (World Cup innovation). Matt Friend added on revenue trends and order book improvement.

Q: Are you expecting the pressures to abate sequentially as the year progresses and can you talk about the back half if there's an opportunity to return the gross margins to growth?

A: Matthew Friend stated margins will remain under pressure in first half of '26 due to Win Now actions and tariff timing, but expect moderation in second half, with short-term product/channel mix headwinds, transitory Win Now impact, and tariff effects moderating.

Q: There's obviously too many dynamics to think about guiding past Q1. But just given that wholesale is the largest driver of your business today and you are seeing the inflection in order growth, are there any scenarios where you could get back to total growth at any point in this year?

A: Elliott Hill mentioned signals of Win Now actions working, energized teams, good partner reaction, order book improvement, and progress in geos, but each geo is at different stages, with full recovery taking time.

Q: I want to focus on the China marketplace and the opportunity to drive full recovery there over time. Can you talk about the timeline and the cadence of what we should see over the course of the next fiscal year as you look to return that to growth?

A: Elliott Hill said China is on a different timeline due to structural marketplace differences, but the team is focused on cleaning the marketplace, testing new retail concepts, elevating consumer-led product concepts, and renovating/upgrading stores, with changes taking time but progress being made.

Q: As you think about kind of once the smoke clears through this year, just structurally, is there any reason why this business like should not be a double-digit margin business?

A: Matthew Friend stated NIKE has historically been a double-digit margin company and aims to return to sustainable organic growth, with disciplined expense management yielding operating leverage, and Elliott Hill added teams are embracing Win Now actions to accelerate return to double-digit margins.