Nike $NKE on Thursday released results for the fourth fiscal quarter and at first glance it’s a fantastic read. Revenues 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). However, these figures have a catch hidden right in the second paragraph of the press release.

Where the miracle came from

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

China still hurts, Converse plunges

The real picture of the business is better shown by regional numbers. Revenues 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, meaning 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 really 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'd like them to be."

Elliott Hill, CEO of NIKE, Inc.

What’s next

For the full fiscal year 2026, revenues ended at $46.4 billion, flat year‑on‑year but down 2 percent on a currency‑neutral basis. Net income fell to $3.11 billion from last year’s $3.22 billion and EPS decreased to $2.10. Management reiterated for the first two quarters of fiscal 2027 that it expects essentially stagnant earnings, with gross margin expected to improve slightly 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‑on‑year.

My take

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

What’s your take on the results?