Nike books a 986 million dollar tariff refund and triples profit on paper

Nike reported net profit of 1.1 billion dollars in the fourth quarter of financial year 2026, after 211 million dollars in the year earlier quarter. That corresponds to a rise of 407 percent.

The jump goes almost entirely back to a single item. The group booked an expected refund of import duties of 986 million dollars. That contributed 52 cents to earnings per share.

Adjusted for that effect, earnings were 20 cents per share. Expectations had been 13 cents, so the estimate was beaten even without the one off effect.

Revenue was 10.97 billion dollars against an expectation of 10.86 billion. Against the year before that is a fall of one percent, and four percent adjusted for currency.

The share fell as much as eight percent after the close but then recovered most of that.

The short version

• Net profit in the fourth quarter of financial year 2026 rose to 1.1 billion dollars, an increase of 407 percent.
• The jump goes almost entirely back to an expected tariff refund of 986 million dollars, which contributed 52 cents to earnings per share.
• Revenue was 10.97 billion dollars, a fall of one percent, and in China it fell twelve percent.

How the refund came about

The group had paid tariffs during the financial year and booked them as costs as it went. In the fourth quarter management concluded that a reclaim had become probable.

From that arose the one off booking of 986 million dollars, which offsets the burdens spread across the year.

By the end of the quarter on 31 May more than 300 million dollars of that had actually been received. The rest stands as a receivable in the books.

The effect on the margin is considerable. The gross margin rose 890 basis points to 49.2 percent. Without the refund it was 40.2 percent and therefore ten basis points below the previous year.

The comparison with Adidas is instructive. The German competitor explicitly did not include possible refunds of 250 to 300 million dollars in its full year guidance because of a different accounting approach. Nike by contrast has already booked the amount.

China keeps falling

The real problem sits in the operating business. In China revenue fell twelve percent. For the quarter a fall of around 20 percent had previously been expected.

The group has begun a comprehensive reset there, with a stronger focus on locally developed products and a more premium positioning.

North America was the bright spot with revenue up three percent.

The shift between channels stands out. Wholesale gained four percent to 6.6 billion dollars, while direct sales fell seven percent to 4.1 billion dollars. Online fell twelve percent and the company stores seven percent.

That runs exactly counter to Adidas, where the company channels grew at more than 20 percent, three times as fast as wholesale.

The subsidiary brand Converse lost 32 percent to 244 million dollars, with declines in every region.

Classic models cut by two billion dollars

For the full year revenue was 46.4 billion dollars and therefore unchanged against the previous year, and two percent below on a currency adjusted basis. Net profit fell three percent to 3.11 billion dollars and earnings per share three percent to 2.10 dollars.

One figure from the analyst call is notable. The group has cut revenue from classic shoe models by more than two billion dollars and still kept total revenue stable.

The performance area grew in the mid single digits, carried by running, football and basketball. Leisure wear and the street fashion of the heritage brand by contrast stayed weak.

More than 15,000 retail spaces in the trade and 150 company stores were reworked.

The outlook stays cautious

For the coming quarters Nike expects a revenue decline in the low to mid single digits. The second quarter is to be weaker because of one off effects in the previous year.

An improvement in the gross margin is expected from the first quarter of the new financial year. On earnings management expects a largely unchanged development across three quarters, without the refund effect.

On tariffs the group assumes an increase from ten to 15 percent after July.

Chief executive Elliott Hill spoke of continuing headwinds on revenue. Departing finance chief Matthew Friend pointed out that sell through in the trade remains difficult and that the market situation is unlikely to improve in the short term.

Frequently asked questions

How did the tariff refund come about

The group had paid tariffs during the financial year and booked them as costs as it went. In the fourth quarter management concluded that a reclaim had become probable. From that arose the one off booking of 986 million dollars.

What is left after adjusting

Adjusted for that effect, earnings were 20 cents per share against an expected 13 cents. The gross margin rose 890 basis points to 49.2 percent, and without the refund it was 40.2 percent, ten basis points below the previous year.

How is the business in China developing

In China revenue fell twelve percent, where a fall of around 20 percent had previously been expected. The group has begun a comprehensive reset there, with a stronger focus on locally developed products and a more premium positioning.

This analysis is for information only and is not investment advice.