Nike $NKE on Thursday released results for the fourth fiscal quarter and at first glance it’s a fantastic read. Revenue reached $10.97 billion versus the expected $10.86 billion and earnings per share climbed to $0.72, which is a multiple of what the market expected ($0.13). But these numbers have a catch, which is hidden right in the second paragraph of the press release.

Where did that miracle come from

Of the $0.72 per share, $0.52 is attributable to a one-off benefit from the expected refund of duties collected under the U.S. IEEPA, worth just under $1 billion. Without it, EPS would be $0.20, which still beats estimates of around $0.12–$0.13, but it no longer looks like a clear turnaround for the better. The same effect flowed into the gross margin, which rose year-over-year by 890 basis points to 49.2 percent, with roughly 900 basis points of that being the tariff bonus.

China still hurts, Converse is plunging

The real picture of the business is shown by regional figures. Sales in China fell 12 percent to $1.3 billion and 17 percent on a currency‑neutral basis, as local brands continue to take market share. The Nike Direct segment—its own e‑commerce and stores—declined 7 percent, with digital sales down as much as 12 percent. Converse did even worse, with sales plunging 32 percent to $244 million.

The only truly encouraging news is North America, where sales rose 3 percent, and the wholesale channel, which improved by 4 percent.

"Overall, the results are still not where we want them to be."

Elliott Hill, CEO NIKE, Inc.

What's next

For the full fiscal year 2026, revenue ended at $46.4 billion, flat year‑over‑year but 2 percent lower on a currency‑neutral basis. Net income fell to $3.11 billion from $3.22 billion last year and earnings per share declined to $2.10. Management reiterated for the first two quarters of fiscal 2027 that it expects essentially flat earnings, noting that gross margin should slightly improve already in the first quarter. Nonetheless, the company returned roughly $2.5 billion to shareholders over the year, mostly in the form of dividends, which rose 5 percent year‑over‑year.

My view

I avoid the branded goods segment. It doesn’t make sense to me in the long run and I think "fast fashion" will increasingly take market share, so it currently doesn’t make sense for me to invest even in, say, $MC.PA.

What do you think about the results?