Is This Retail Rebound For Real Or Just A Relief Rally?

30‑Second Take

Why now? Nike surprised the Street with a modest beat on both revenue and EPS in Q4, despite a massive 86% decline in profit and a 12% decline in revenue.

After months of weak sentiment and underperformance in the stock market, investors appear ready to reward signs of a bottom, pushing shares up 10% in premarket trading.

The turnaround plan under new CEO Elliott Hill is beginning to show traction: inventories are declining, store traffic is improving, and Nike is rebuilding key wholesale channels, including Amazon.

It’s early, but sentiment may have finally turned a corner.

Trade Setup

Time frame: Swing to medium-term
Edge type: Oversold bounce + early turnaround traction

Snapshot Table

Chart

5-Day Synopsis: NKE closed up 2.76% to $62.54 on June 26 and surged over 10% in after-hours trading following better-than-expected Q4 results.

Volume spiked sharply post-call, and early bids suggest the stock may test overhead resistance at $70–72.

After sliding to six-year lows earlier this week, the bounce looks technically supported.

Bull Case 

Core thesis: Nike’s multi-quarter slide may finally be stabilizing.

Under new CEO Elliott Hill, the company is realigning its focus around sports performance, streamlining inventory, and rebuilding its wholesale channel strategy, reversing key missteps from the Donahoe era.

Hill is shifting Nike away from its DTC-at-all-costs model and reconnecting with partners like Amazon and Urban Outfitters, giving Nike broader reach while managing cost pressures.

Nike’s Q4 revenue of $11.1B beat expectations despite being down YoY, and EPS of $0.14 beat by $0.02.

Inventory declines, positive store comps, and improving wholesale traffic (even amid ongoing margin pressure) show signs of life.

The return to sport segmentation and athlete-driven marketing could gradually rebuild innovation credibility after years of brand dilution.

The product pipeline, from the A’ja Wilson collection to future Skims collabs, looks more aligned with Nike’s long-term strengths: footwear, athlete relevance, and premium positioning.

A focus on cost discipline, channel optimization, and targeted storytelling is a welcome change from the prior 'all-things-to-all-people' strategy.

Catalysts: 

Catalysts for NKE include:

• Store traffic down just 3.2% in May vs. 10.2% in April

• Inventory is now declining YoY across major regions

• Amazon relisting this fall expands digital footprint

• China localization and store rework are underway

• Reorganization around Nike/Jordan/Converse and core sports

Valuation upside: At ~$69/share, NKE trades at ~20.8x forward earnings, near a decade low for a brand of its caliber.

The free cash flow yield is ~5.7%, which is well above the S&P 500 average and the 10-year Treasury yield.

With many of the operational and inventory missteps now priced in, a re-rating is finally plausible if margins begin to stabilize in the second half of.

Nike also trades at ~2 times forward sales, below its 5-year average of ~3.6 times, and significantly cheaper than faster-growing competitors like On or Lululemon.

If gross margins can normalize from 39% back toward 44%, Nike could regain its premium valuation.

Technical tailwind: The stock has bounced strongly from its six-year lows, driven by premarket momentum and volume expansion.

A sustained close above $70 could push shares toward the $74–76 resistance zone seen in Q1.

RSI is rebounding from oversold territory, suggesting room for further upside in the near term if sentiment holds.

Bear Case 

Key risk: Nike’s Q4 may have exceeded low expectations, but the underlying results paint a picture of a company still under significant operational stress.

Profits collapsed by 86%, revenues fell 12%, and digital sales, once the company’s growth engine, dropped 26%.

Even after heavy clearance activity and margin sacrifice, North American revenue was down 11%.

EPS beat by just $0.02, and Q1 FY2026 guidance points to continued revenue contraction and compressed gross margins.

Structural challenges: The brand’s misalignment with core athletic consumers is still being corrected.

Nike’s DTC-first push under prior leadership eroded long-standing wholesale relationships while inflating digital logistics and customer acquisition costs.

That strategy is now being reversed, but backtracking comes with its own costs: thinner margins, inventory risk, and diluted control over the customer experience.

Meanwhile, Nike is being outpaced by newer brands that are leaner, more agile, and closer to the consumer.

On, Hoka, Lululemon, and others have found success by designing product pipelines around community, performance data, and faster feedback loops.

Nike, by contrast, continues to lean heavily on legacy franchises (Air Force 1, Air Jordan, Dunk) with minimal innovation over the past few years.

The brand has also underperformed in women’s, where Nike has historically struggled to capture wallet share versus competitors like Alo Yoga or Lululemon.

Its long-awaited Skims collaboration, intended to close that gap, was delayed, and its execution remains unproven.

Macro/sector headwinds: Tariffs are now a very real drag on margins. Management flagged a $1 billion incremental cost in FY2026 due to higher import duties.

They expect to offset this over time via supply chain adjustments and pricing, but Nike still sources 16% of its product from China, and transitioning that footprint to other countries isn’t trivial.

At the same time, China, formerly Nike’s growth engine, is soft.

The company missed revenue estimates there in Q4 and acknowledged that competitive pressure from domestic brands and consumer skepticism remain hurdles.

A slower-than-expected recovery in China could weigh heavily on Nike’s global rebound, especially as consumer spending weakens across the APAC region.

Sentiment risk: Despite a strong rally after earnings, Nike is still down over 30% YoY, has underperformed the S&P 500 for three consecutive years, and entered earnings trading at a six-year low.

Bulls may view this as a contrarian setup, but it also reflects long-term doubts about management credibility and brand direction.

The stock now trades at ~20.8x forward earnings, which is not unreasonable but not particularly cheap.

At current levels, much of the near-term optimism could be priced in.

If Q1 results fail to show clear progress in margin recovery or revenue stabilization, this bounce could fade quickly.

Quick Checklist 

✅ Thesis still valid after today’s close
✅ Early signs of turnaround progress
✅ Catalyst date double-checked (Earnings expected September 2025)

Deep‑Dive Links

• FY and Q4 2025 Earnings Report 

• Analyst Ratings and Price Targets

• Short Interest Data

• Company Profile and Investor Relations

That’s all for today’s Everyday Alpha. We’ll have a new pick for you every morning before the market opens, so stay tuned!

Best Regards,
—Noah Zelvis
Everyday Alpha