Key takeaways
- Shares of JD Sports fell nearly 2% on Wednesday after Nike’s disappointing earnings guidance
- Nike reported fiscal fourth-quarter revenues down 1%, with additional declines expected in the first half of fiscal 2027.
- Sales in China fell 17% on a constant currency basis, accelerating from a 10% decline in the previous quarter.
- Nike beat earnings expectations: adjusted EPS of 20 cents versus analyst estimates of 13 cents
- Nike shares are down 35% year to date, with an additional 3% drop in Wednesday’s pre-market session.
The sneaker and apparel giant’s disappointing quarterly performance sent ripples through the retail sector, with JD Sports stock falling nearly 2% on Wednesday as market participants reacted to a bleak outlook from one of the brands’ most important suppliers.
Nike The fiscal fourth-quarter numbers revealed a 1% revenue contraction, accompanied by management warning of accelerating sales deterioration during the first half of fiscal 2027. The disappointing outlook immediately put pressure on JD Sports shares on the London Stock Exchange, where the company trades under the ticker symbol JD.
Nike shares fell 3% during pre-market hours on Wednesday. The stock has lost approximately 35% of its market value throughout the current calendar year.
Despite beating final expectations — with adjusted earnings of 20 cents per share versus the LSEG consensus of 13 cents — investor sentiment remained decidedly negative. Market participants have focused their attention on revenue trends rather than profit margins, and these trends paint a worrying picture.
CEO Elliott Hill took the helm nearly two years ago with a clear turnaround agenda. However, Wall Street remains skeptical about whether the turnaround strategy can deliver results quickly enough.
China intensifies struggles
The Greater China market once again emerged as Nike’s most important weakness. Regional sales contracted 17% on a constant currency basis during the fourth quarter, a sharp deterioration compared to the previous quarter’s 10% decline.
While Nike internally expected a 20% decline, making the actual result slightly better than expected, this offers little consolation.
The company continues to lose market share to local Chinese sports brands that have succeeded in attracting the attention and loyalty of local consumers. Greater China represents approximately 15% of Nike’s total annual revenue and ranks as its third largest geographic market worldwide.
Continued high inventory levels coupled with intense competitive pressure create a formidable near-term challenge for Nike’s operations in China.
The North American business shows promise
The North American market had more encouraging results, recording revenue growth of 3% during the quarter. This improvement stems from Nike Strategic overhaul of wholesale partnerships that had been significantly scaled back under former CEO John Donahue, which focused strongly on direct-to-consumer distribution.
Resolving this strategic pivot has required significant time and resources, but Q4 performance in North America indicates tangible progress.
However, a comprehensive overview remains difficult. Overall revenues continue to decline, business in China is declining sequentially, and corporate leadership expects this trajectory to continue through at least the first six months of the next fiscal year.
JD Sports, whose store network relies heavily on Nike merchandise, has seen spillover effects. The stock’s 2% decline on Wednesday underscores the retailer’s deep dependence on the path and timing of Nike’s recovery.
Nike’s adjusted earnings per share of 20 cents for the fourth quarter significantly exceeded the analyst consensus of 13 cents compiled by LSEG.
