Over the past decade, Nike (NKE) has experienced an average earnings-related stock price movement of approximately 6% in the week following its quarterly earnings release. The at-the-money June 27th $60 strike straddle is approximately $5.70 as I write this, or 9.5% of the current stock price. Why is the options market anticipating so much earnings-related volatility? Based on alternative data, sales trends, and inventory metrics, Nike faces a challenging near-term outlook as it approaches its fiscal Q4 2025 earnings report next week on June 26. The company is navigating a challenging consumer environment, intense competition, and macroeconomic headwinds, including, potentially, tariffs. “New” (he was actually a multi-decade executive at Nike, who recently returned) CEO Elliott Hill returned to Nike to execute a turnaround strategy (“Win Now”) focused on innovation, wholesale partnerships, and brand repositioning. Alternative data metrics are sending conflicting signals. For example, Bloomberg Second Measure Observed Sales data declined 14.95% year-over-year (YoY) through May 31st, significantly worse than the industry average of a 7.9% decline. Placer.ai ‘s US Foot Traffic estimated visits rose 4.3% versus an industry average decline of 1.1%. Placer.ai tracks the locations of millions of mobile devices against known geographic locations, including retail stores. Anecdotally, Placer’s results have tracked more closely than Bloomberg’s to reported results in the handful of discretionary names I’ve been tracking recently. Similarweb’s global web traffic visits declined 20.8%, compared to a 0.5% decline for the industry overall. This is a metric I have only recently started tracking, and I have no prior experience with it. Nike’s recent quarters show persistent revenue declines, with Q3 2025 (ended February 28, 2025) reporting: Revenue : $11.3 billion, down 9% YoY (chart below). Nike Direct : $4.7 billion, down 12% YoY, driven by a 15% drop in digital sales and a 2% dip in store sales. Wholesale : $6.2 billion, down 7% YoY, with weakness in China and Europe offsetting U.S. growth. Regional Performance : China sales declined 17% year-over-year, a significant drag due to economic slowdown and concerns about job security. Europe also weakened, while North America showed pockets of strength in running and training categories. For Q4, Nike guided to a “mid-teens” revenue decline (likely 13–15%), worse than analyst expectations of an 11.4% drop to $11.07 billion. Key drivers include: Weak Holiday Season : Q3 saw strong December demand but “double-digit declines” in January and February, suggesting Q4 (March–May) started poorly. Category Performance : Running and training categories experienced growth in Q3, driven by new launches (e.g., Pegasus Premium, Vomero 18). However, this was offset by double-digit declines in Sportswear and Jordan Brand, particularly in classic footwear such as the Air Force 1 and Dunk. Competition : Rivals like On Running and Hoka (owned by Deckers) are gaining market share with innovative, trendier products, eroding Nike’s dominance in the running category. Summary Prognosis : Nike’s Q4 is expected to be challenging, with revenues likely falling 13%–15% year-over-year (YoY) to $10.6–10.8 billion, driven by weak consumer spending, China’s slowdown, and declines in digital sales. Early progress under CEO Elliott Hill (new products, wholesale ties) may not offset macro headwinds. Gross Margins : Expect a 400–500 basis point drop to 37%–38%, hit by markdowns to clear $7.5–8 billion in inventory, tariff costs (China/Mexico imports), and higher product costs. Long-term margin recovery depends on full-price DTC and innovation. (1 basis point equals 0.01%) Revenue Outlook : Decline, not stagnation, is the base case, with a mid-teens drop guided. Upside hinges on new product traction and wholesale gains. Valuation : Fair value of $80–$85 (P/E 38–40x, EV/EBITDA 22x), supported by comps (Adidas, Lululemon). Upside to $90–$100 if turnaround accelerates; downside to $50–$60 if challenges persist. Trade A diagonal strangle swap seeks to capitalize on elevated near-term options prices with defined risk. The idea here is that a lot of bad news is already baked into this cake. The following trade can accommodate a post-earnings move of more than 12.5% in either direction and likely still see profits without risking substantial losses in the event the stock is little changed post-earnings. Buy NKE Oct. 17 $50 put Buy NKE Oct 17 $70 call Sell NKE July 18 $67.50 call Sell NKE July 18 $52.50 put DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
#Options #traders #betting #Nike #big #move #earnings #week
