Nike Beats on Earnings But Struggles in China and Faces Tariffs

Core Insights - The last three years have seen a significant decline in Nike's performance, with shares dropping approximately 34% and notable decreases in sales, margins, and profits [2][3] - Strategic missteps, including weak product innovation and challenges with the direct-to-consumer strategy, have contributed to Nike's struggles [3][7] - Despite these challenges, analysts forecast potential upside for Nike shares, indicating a path to recovery [4][7] Financial Performance - Nike reported revenue of $12.4 billion in its latest quarter, reflecting a growth rate of 1%, which exceeded Wall Street expectations of just under $12.2 billion [4] - The diluted earnings per share (EPS) was 53 cents, a decline of 32% year-over-year, but better than the forecasted 38 cents [5] - The company anticipates a low single-digit revenue decline in the next quarter and expects gross margin to fall by 200 basis points due to tariff pressures [5] Operational Metrics - Gross margin decreased by 300 basis points to 40.6%, primarily due to tariff-related challenges, with expectations of continued impact [6] - North American sales grew by 9%, while other regions experienced negative currency-adjusted growth, with Greater China sales falling by 16% [8] - The direct-to-consumer strategy faces challenges, particularly in China, while wholesale and running product lines are performing well [7]