Nike's Sales, Margins Show Progress — But Tariffs Still Cast A Shadow

Core Viewpoint - Nike Inc. is showing signs of a potential recovery in the second half of the year, driven by improving sales trends, cleaner inventories, and stronger wholesale orders despite facing tariff challenges [1]. Sales and Demand - Analysts indicate that Nike is on track for stabilization in the second half of the fiscal year, with second-quarter sales expected to improve sequentially from a mid-single-digit decline in the first quarter [3]. - Solid U.S. back-to-school trends are anticipated to support Nike's performance [3]. Inventory and Orders - Confirmation of healthier sales momentum and clean inventory levels by the end of the first half would reinforce the view of a progressing recovery [4]. - Nike's wholesale order book is strengthening, with fall orders outside China improving in the third quarter and the total holiday order book turning positive in the fourth quarter [5]. Financial Projections - Analyst Lorraine Hutchinson has adjusted fiscal 2026 and 2027 EPS estimates to $1.54 and $2.77, respectively, due to higher tariffs [6]. - Nike is expected to face a 75-basis-point gross margin headwind in fiscal 2026, with an additional 50-basis-point headwind anticipated as global exposure increases [6]. Margin Outlook - Gross margin is forecasted to stabilize in the second half after several quarters of declines, supported by stronger full-price sales, reduced wholesale buybacks, and pricing actions to counter tariffs [7]. - Challenges remain from product mix, channel mix, and tariff costs [7]. Stock Performance - Nike shares were trading at $72.87, up 0.16%, within a 52-week range of $52.28 to $90.62 [8].