As Nike Inc. continues to reset its business, several hiccups could be on the horizon. The company reports third quarter earnings results next Tuesday. And investors are pondering four potential concerns: a slowdown in Europe, an unhealthy wholesale business in the U.S., continued sluggishness in China and the fate of Converse, which could be on the chopping block. More from WWD Taken together, those challenges suggest that Wall Street could have a “bearish” outlook for the brand. Guggenheim Securities ...

Core Insights - The company is focused on stabilizing its business by restoring dealer confidence and aligning wholesale activity with retail demand, aiming for sustainable growth in the future [1][3] - Immediate priorities include improving dealer profitability, reigniting brand momentum, and reducing costs, with a commitment to these goals remaining unchanged [1][5] - The company is optimistic about early signs of improvement, particularly in North American retail sales, which have shown growth [2][11] Inventory Management - The company has taken intentional actions to address elevated dealer inventory, particularly in North America, resulting in a 16% decline in dealer inventory relative to year-end 2024 levels [11][33] - Global dealer inventory was down 17% over the same period, exceeding the target of a 10% reduction, indicating solid progress [11][33] - The focus on inventory discipline is central to the company's strategy, with targeted promotional support for touring models and disciplined quarterly planning [10][12] Financial Performance - In Q4 2025, consolidated revenue decreased by 28%, driven by a 10% decline in HDMC revenue and a 59% drop in HDFS revenue [26][28] - The operating loss for Q4 was $361 million, compared to a loss of $193 million in 2024, with significant losses attributed to both HDMC and HDFS [26][27] - For the full year 2025, consolidated revenue was $4.5 billion, a 14% decrease compared to the previous year, with earnings per share dropping from $3.44 to $2.78 [28][29] Retail Sales Performance - North American retail sales of new motorcycles increased by 5% in Q4, while international sales decreased by 10%, leading to a global retail sales decline of 1% [28][30] - The company experienced strength in lower-priced sport motorcycle models, which were up 33%, while the Grand American touring product saw a 6% increase [30][32] - EMEA retail sales declined by 24% in Q4, reflecting ongoing macroeconomic challenges, while Asia Pacific retail sales were down 1% [30][31] Strategic Initiatives - The company is committed to restoring relationships with dealers, improving inventory management, and enhancing customer focus through a refined product portfolio [5][6] - A new e-commerce strategy is being implemented to drive dealership traffic and support motorcycle sales, addressing previous issues of customer confusion and excessive discounting [8][9] - The company plans to announce a new strategic plan in May, which is expected to outline further initiatives for growth and stability [3][24] Future Outlook - The company anticipates 2026 to be a transition year, with expectations for improved dealer health and a return to long-term earnings power [12][53] - Projected retail units for 2026 are between 130,000 to 135,000, with a similar expectation for wholesale units, indicating a balanced approach to inventory management [54][55] - The company expects to face increased costs from tariffs in 2026, forecasting between $75 million to $105 million based on current levels [55][56]

Financial Data and Key Metrics Changes - Consolidated revenue in Q4 2025 was down 28%, with HDMC revenue down 10% and HDFS revenue down 59% [25] - Consolidated operating income for Q4 was a loss of $361 million, compared to a loss of $193 million in Q4 2024 [25] - For the full year 2025, consolidated revenue was $4.5 billion, a 14% decrease compared to the previous year, and earnings per share was $2.78, down from $3.44 in 2024 [27] Business Line Data and Key Metrics Changes - HDMC retail sales in Q4 increased by 5% in North America, while international retail sales decreased by 10%, leading to a global retail sales decline of 1% [27] - For the full year 2025, North American retail sales were down 13%, while EMEA retail sales were down 11% [28][29] - HDFS revenue for Q4 was $106 million, down from $257 million in the prior year, primarily due to lower retail and wholesale finance receivables [39] Market Data and Key Metrics Changes - North American dealer inventory declined by 16% relative to year-end 2024 levels, while global dealer inventory was down 17%, exceeding the 10% reduction target [11][31] - In Latin America, Q4 retail sales increased by 10%, with both Brazil and Mexico showing growth [30] - Asia Pacific retail sales declined by 1% in Q4, with significant weakness in China [29] Company Strategy and Development Direction - The company is focused on stabilizing the business by restoring dealer confidence and aligning wholesale activity with retail demand [6][12] - Immediate priorities include improving dealer profitability, reigniting brand momentum, and reducing costs [7] - A strategic plan is expected to be announced in May 2026, with a focus on sustainable growth and optimizing inventory management [4][23] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that 2025 was a challenging year, with macro-driven pressures and internal challenges [4] - The company expects margins to be under pressure in the near term due to production levels running below wholesale [13] - 2026 is viewed as a transition year to reset the business and finalize the new strategy, with expectations for improved dealer health and financial results [12][16] Other Important Information - The HDFS transaction is expected to transform the business into a capital-light model, with a significant reduction in debt and improved financial flexibility [24][38] - The company plans to conduct a rigorous review of its cost base and operating expenses, targeting at least $150 million in annual run rate savings starting in 2027 [20][21] Q&A Session Questions and Answers Question: Inquiry about HDFS operating income expectations - Management indicated that HDFS operating income is expected to be between $45 million and $60 million for 2026, with a long-term view of tripling that income over the next few years [55][56] Question: Wholesale guidance and inventory levels - Management noted that Q1 2026 wholesale shipments are expected to be down slightly compared to the previous year, with a gradual increase anticipated in Q2 [60][62] Question: Retail sales expectations and LiveWire investment - Management expressed optimism about retail sales growth in 2026, driven by new model introductions and a focus on supporting dealers [70][72]

Financial Data and Key Metrics Changes - Consolidated revenue in Q4 2025 decreased by 28%, with HDMC revenue down 10% and HDFS revenue down 59% [25] - Consolidated operating income for Q4 was a loss of $361 million, compared to a loss of $193 million in Q4 2024 [26] - For the full year 2025, consolidated revenue was $4.5 billion, a 14% decrease compared to the previous year, and operating income was $387 million, down from $417 million in 2024 [27] Business Line Data and Key Metrics Changes - HDMC retail performance saw North American retail sales of new motorcycles up 5% in Q4, while international retail sales were down 10% [27] - For the full year 2025, global retail sales of new motorcycles were down 12%, with North America and international markets performing similarly [30] - HDFS revenue for Q4 was $106 million, down from $257 million in the prior year, primarily due to lower retail and wholesale finance receivables [38] Market Data and Key Metrics Changes - North American retail sales for Q4 were up 5%, while EMEA retail sales declined by 24% due to macroeconomic conditions [28][29] - In Asia-Pacific, Q4 retail sales declined by 1%, with significant weakness in China [29] - Latin American retail sales increased by 10% in Q4, with both Brazil and Mexico showing growth [30] Company Strategy and Development Direction - The company is focused on stabilizing the business by restoring dealer confidence and aligning wholesale activity with retail demand [6] - Immediate priorities include improving dealer profitability, reigniting brand momentum, and reducing costs [7] - A strategic plan is expected to be announced in May 2026, with a focus on sustainable growth and optimizing inventory management [4][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that 2025 was a challenging year, with macro-driven pressures and internal challenges [4] - The company expects 2026 to be a transition year as it resets the business and finalizes its new strategy [12] - Margins are expected to be under pressure in the near term due to production runs being below wholesale [13] Other Important Information - Dealer inventory at the end of Q4 was down 17% compared to the previous year, exceeding the target reduction of 10% [30] - The HDFS transaction is expected to transform the business into a capital-light, de-risked model, with a significant reduction in debt [25][37] - The company plans to conduct a rigorous review of its cost base and operating expenses to align with current demand levels [20] Q&A Session Summary Question: Inquiry about HDFS operating income expectations - Management indicated that HDFS operating income for 2026 is expected to be between $45 million and $60 million, with long-term profitability projected to be significantly higher [51][52] Question: Wholesale guidance and inventory levels - Management noted that Q1 2026 wholesale shipments are expected to be down slightly compared to the previous year, with a gradual increase anticipated in Q2 [57][60] Question: Expectations for global retail sales - Management expressed optimism about U.S. retail sales, particularly with the introduction of new models, while being cautious about overall retail performance [64][66]

Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $328 million, down 19.7% year over year, primarily due to a significant cut in marketing spend [22][24] - Gross profit margin remained flat at 59.1%, with reductions in material costs offset by unit volume deleverage and a shift towards lower-priced products [23] - Operating expenses were $185 million, down 21% year over year, reflecting cost-saving initiatives [24][26] - Adjusted EBITDA was $23.6 million, down $4.7 million from the prior year, with an adjusted EBITDA margin of 7.2%, which is 30 basis points higher than the prior year [24][25] Business Line Data and Key Metrics Changes - The company is focusing on optimizing its product portfolio and distribution channels, with plans to enhance the product lineup to meet a broader customer base [12][13] - Marketing efficiency has improved, with a 24% increase in conversion year over year in Q2 [15] Market Data and Key Metrics Changes - The company expects full-year net sales of approximately $1.45 billion, representing a 14% year-over-year decline, with second-half sales anticipated to be roughly comparable to the first half [29][30] - The promotional strategies implemented are driving a higher Average Revenue per Unit (ARU) while improving product mix [31] Company Strategy and Development Direction - The company is implementing a reset strategy focused on cost discipline, commercial and product improvement, and better cash flow management [21][26] - Plans include exploring digital-first retail partnerships and enhancing distribution channels while maintaining a strong margin profile [40][49] - The company aims to generate breakeven cash flow in the second half of the year, prioritizing debt repayment with any positive operating cash flow [28][34] Management's Comments on Operating Environment and Future Outlook - Management acknowledges that sales results are not yet in line with the industry but sees encouraging recent trends [27] - The company is actively engaged with lenders to improve its capital structure and is exploring refinancing options [28][16] - Management remains focused on executing the sales forecast and maintaining compliance with debt covenants [29][69] Other Important Information - The company has identified $130 million in cost reductions for 2025, exceeding the original target of $80 million to $100 million [26] - The organizational redesign has led to significant savings, with a 22% reduction in operating expenses compared to Q1 [26] Q&A Session Summary Question: Breakdown of additional cost savings expected this year - Management indicated that the $130 million in cost savings roughly follows the same percentages as previously announced, focusing on structural changes in G&A and R&D [36][37] Question: Consideration for digital-first retail partnerships - Management emphasized the importance of their vertically integrated model and the intent to enhance distribution without compromising margins [39][40] Question: Changes to product assortment and pricing strategy - Management is conducting significant consumer research to understand customer needs and will start rolling out new products in 2026 [44][46] Question: Advertising strategy and future marketing spend - Management aims to optimize marketing spend as a percentage of sales, expecting it to become more efficient and lower in the long term [53][54] Question: Guidance on gross margin expansion and tariff pressure - Management expects to mitigate tariff impacts through previous pricing actions and material cost reductions, maintaining confidence in their gross profit margin [62][63]