Nike reported fourth-quarter fiscal 2026 results, with revenue declining 3 percent year-over-year to $12.9 billion. The athletic apparel giant faced headwinds across North America, its largest market, where wholesale revenue fell sharply as retailers reduced inventory levels. International markets also softened, particularly in China, where consumer demand remains under pressure amid economic uncertainty.
Gross margin contracted to 45.1 percent from 45.7 percent in the prior year quarter, squeezed by unfavorable product mix and elevated freight costs. Operating income declined 6 percent to $2.6 billion. Net income fell to $2.5 billion, or $1.65 per share, down from $1.72 in Q4 2025.
Management attributed the weakness partly to wholesale channel normalization, where major retailers including Dick's Sporting Goods and Foot Locker worked down excess inventory accumulated in prior periods. Direct-to-consumer channels, which carry higher margins, also faced traffic declines in key markets. The company acknowledged that consumer spending on athletic footwear has decelerated, with competitors gaining share in running and basketball categories.
Looking ahead, Nike guided for low-single-digit revenue growth in fiscal 2027, assuming stabilization in wholesale channels and modest improvement in China. The company plans to accelerate direct-to-consumer initiatives and expand its digital platforms to offset wholesale pressure. Capital expenditure will focus on supply chain modernization and technology infrastructure.
Management emphasized cost discipline, announcing a restructuring that will reduce global workforce by 10 percent, or approximately 10,500 jobs. This move targets $5 billion in annual cost reductions by fiscal 2028. The company also plans to streamline its SKU portfolio, eliminating slower-moving products to improve inventory turns and enhance profitability.
Investors reacted cautiously to the results. While Nike maintained its dividend at current levels, the earnings miss and cautious guidance reflect broader challenges in athletic retail. The company faces intensifying competition from On Holdings and Hoka, which have captured market share in premium running segments. Supply chain normalization and China's sluggish consumer environment present ongoing obstacles.
Nike's near-term path requires successful execution on inventory reduction and margin recovery through product mix improvement and pricing strategies. Watch for wholesale inventory trends in the next quarter and any stabilization signals from China markets.