To The Moon

$Nike(NKE)$

Nike (NYSE: NKE), one of the most recognizable consumer brands in the world, is set to report its fiscal Q4 2025 earnings after the market closes on Thursday, June 26, 2025. As we approach this key report, the stakes couldn’t be higher. Nike is navigating a critical inflection point — one marked by falling sales, strategic course corrections, and new macroeconomic headwinds that threaten to derail its post-pandemic recovery.

For long-term investors, Nike’s enduring global brand and historical resilience have always made it a tempting buy-the-dip candidate. But for those eyeing a short- to medium-term position, this may be a quarter to sit out.

Here’s a comprehensive look at what Nike has reported, what’s changed since, and why this upcoming earnings release may be one of the most pivotal in the company’s recent history.

Earning Overview - Nike Last Reported A Disappointing Quarter

Nike’s last earnings report came on March 20, 2025, covering the three-month period that ended February 28. The numbers were underwhelming — not just in headline terms but also in the underlying trends.

• Revenue fell 9% year-over-year to $11.3 billion, marking another quarter of revenue contraction.

• Nike Direct sales (its DTC channel via its app and website) were down 12%.

• Wholesale sales through traditional retail partners dropped 7%.

• Gross margin fell by a significant 330 basis points, down to 41.5%, signaling broad-based pricing and cost pressure.

What made the report more concerning was that both key channels — direct and wholesale — saw double-digit and mid-single-digit declines, respectively. This wasn’t a case of one underperforming segment dragging down results. The weakness was broad, and the margin compression suggested that Nike was either discounting to move inventory or facing higher production/import costs — or both.

Strategic Missteps: When Direct-to-Consumer Becomes a Liability

The roots of Nike’s struggles can be traced back to a bold strategic move made several years ago: the decision to go all-in on a direct-to-consumer (DTC) model. By bypassing wholesalers like Macy’s, Foot Locker, and independent shoe retailers, Nike sought to capture higher margins and tighter control over the customer experience.

And during the pandemic, this strategy worked. With supply chains strained and retail stores shuttered, Nike’s online channels became a strength. Why ship product to Foot Locker at wholesale rates when you could sell it through your app at full price?

But that strategy had a shelf life.

As global supply chains normalized and foot traffic returned to third-party retailers, Nike’s reduced wholesale presence opened the door for competitors to claim retail shelf space. Brands like Under Armour, Hoka, On Running, and Adidas began filling the gaps left by Nike, gaining distribution and exposure they previously lacked.

Retailers, once dependent on Nike, happily welcomed these alternatives. They needed inventory. Nike wasn’t supplying it. That shift allowed competitors to gain market share, particularly in North America — a critical market for Nike’s long-term profitability.

Now, with direct sales falling, wholesale sales under pressure, and competitors making inroads, Nike is facing the unintended consequences of a strategic decision that once seemed visionary.

Risk and Challenges

New Leadership, Same Old Problems?

In response to these mounting challenges, Nike installed a new CEO earlier this year. The transition was meant to signal a shift — perhaps back toward a more balanced approach between direct sales and wholesale partnerships.

But strategic turnarounds take time. In its last earnings call, Nike reiterated its commitment to its “Win Now” initiative — a recovery plan focused on operational efficiency, inventory optimization, and reigniting consumer demand. The company claimed the initiative was on track.

That may have been true as of February. But the world looks different today.

Enter the Tariff Problem: A New Economic Headwind

Since Nike’s last earnings report, a massive macro shift has occurred: the reintroduction of broad-based U.S. import tariffs, led by President Donald Trump’s new trade policy.

Tariffs now affect virtually all of America’s trading partners, including China, Vietnam, and Indonesia — three of the most important countries in Nike’s manufacturing network. Unlike some U.S. apparel brands that produce domestically or nearshore in Latin America, Nike is almost entirely reliant on global manufacturing, with a significant portion of its products sourced from Asia.

This puts Nike in the direct line of fire.

Why This Matters:

• Higher input costs: Tariffs could increase the landed cost of Nike’s products by 10–25%, depending on sourcing location.

• Margin pressure: With gross margins already falling to 41.5%, Nike has little room to absorb these costs without passing them on to consumers.

• Inventory pricing mismatch: Product made and priced before tariffs will now sell in a higher-cost environment, compressing profits.

• Uncertain outlook: With the full scope of tariffs not reflected in last quarter’s numbers, the June 26 earnings call will be the first time Nike offers real commentary on this issue.

This makes the upcoming report critical not just for understanding past performance — but for gauging future profitability.

Marketing Sentiment: A Worrying Signal

In a curious twist, Nike’s most recent quarter also revealed that “demand creation” expenses — which include brand marketing and advertising — increased by 8%, even as revenue declined.

On the surface, spending more on brand awareness isn’t inherently bad. But in this context, it raises red flags. If consumer demand were strong, Nike wouldn’t need to boost marketing spend to that extent. Increasing brand marketing during a period of falling sales often signals a company that’s trying to stimulate weak organic demand.

This isn’t performance-based advertising. It’s long-tail brand promotion — the kind of spend that doesn’t pay off for months, sometimes quarters. And right now, Nike doesn’t have the luxury of waiting.

Valuation: Stretching Beyond Fundamentals

Despite the growing risks, Nike’s stock is trading around $59 per share, well above its estimated intrinsic value of $52, based on a detailed discounted cash flow (DCF) analysis.

Moreover, Nike’s forward P/E ratio stands at 38.1x — a valuation multiple that implies robust growth, resilient margins, and a favorable macro environment.

But none of those conditions are present today.

Instead, Nike is dealing with:

• Declining revenue growth

• Margin compression

• A failed wholesale pullback

• Competitive encroachment

• Global tariffs

• Uncertain leadership transition

All of this raises the question: Why is the stock trading at a premium?

The answer is likely brand strength and investor hope — hope that Nike can rebound quickly. But hope is not a strategy.

Should You Buy Nike Stock Ahead of Earnings?

From a risk-reward perspective, the answer is clear: No.

While Nike is undeniably a premium brand with long-term staying power, the next 3 to 9 months are filled with execution risk. With tariffs just beginning to bite and demand still underwhelming, the company is not in a position to surprise to the upside — at least not yet.

The better approach is to wait for the earnings report, listen closely to what management says about tariffs, guidance, and gross margins — and watch how the market reacts. If the stock pulls back into the low $50s or even high $40s, the long-term upside might become compelling again.

But buying now, with earnings and negative catalysts looming? That’s a bet with limited upside and too much downside risk.

Conclusion: Let the Dust Settle First

Nike remains a strong brand. Its long-term prospects — driven by global athletic trends, expanding middle classes in emerging markets, and deep consumer loyalty — remain intact. But the company is currently navigating a perfect storm: self-inflicted strategic wounds, rising input costs, fading pricing power, and macroeconomic friction.

This upcoming earnings call may be one of the most important Nike has held in years. Until management addresses the impacts of tariffs, the future of its distribution strategy, and outlines a clear roadmap for margin recovery, this is a stock best watched from the sidelines.

Let the data come out. Let the price settle. And if the market overreacts — then and only then — consider lacing up for a long-term position.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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