Nike shares slipped Tuesday evening despite the company posting better-than-expected quarterly results. Our patience is running thin on this turnaround story. Total revenue in the company’s fiscal 2026 fourth quarter dipped 1% year over year at $10.97 billion, topping Wall Street expectations of $10.86 billion, according to analyst estimates compiled by LSEG. Earnings per share (EPS) increased 42% from the year-ago period to 20 cents, beating the consensus of 13 cents, LSEG data showed. That figure does not include a 52-cent benefit to EPS from the expected recovery of the IEEPA tariffs — the levies overturned by the Supreme Court earlier this year. NKE YTD mountain Nike YTD The roughly 2% drop after-hours in shares Tuesday is sending Nike to roughly $40 per share. The stock is down about 35% year to date before factoring in the after-hours move. Bottom line We put Nike in the penalty box after the company reported disappointing earnings in March, and the results here are unlikely to improve its standing in the portfolio. While some parts of the business, namely running, have made notable progress over the past year under management’s “Win now” turnaround strategy, the comeback is taking much longer than we anticipated. You could fault management for moving too slowly and not being aggressive enough with rightsizing excess inventory, China remaining a mess, product innovation lacking, or acknowledge that the sportswear competition is larger today than it was a few years ago. However, a tricky macro environment hasn’t been supportive either. The company said it was off to a strong start to the quarter in March, especially in North America. However, outgoing CFO Matthew Friend noted that retail sales decelerated by mid-April. The pressure on the consumer could have been tied to the Iran war- related spike in gas prices, which peaked last month. One positive thing to call out from the quarter is that it sounds like management is finally taking aggressive actions to reduce promotions and improve gross margins. Also, management reiterated its expectation that earnings per share will be flattish year over year starting from this reported quarter through the first two quarters of fiscal 2027 — a three-quarter period. While analyst earnings estimates are still a little bit better than flattish, this guide does not reflect management significantly cutting numbers and resetting expectations once again. That explains why the stock went from being down roughly 9% early in the post-earnings conference call to only down modestly. Management’s decision to prioritize gross margin improvement is a positive development and could earn Nike more patience from Wall Street ahead of its Investor Day in November, which will also feature the company’s new CFO. We believe Nike will eventually regain its footing and return to consistent revenue and earnings per share growth. What remains uncertain is whether that inflection will be as sharp as the market expects. After all, the competitive landscape isn’t getting any easier. Most importantly, we must continually ask ourselves whether our capital is better invested in Nike or deployed elsewhere. Given the ongoing uncertainty surrounding the company and several smaller positions in the portfolio that we’d rather build up, we believe better opportunities lie elsewhere. We’ll huddle to decide if a change will be made. Our Club rating on the stock and price target are also under review. Quarterly commentary By region, it was disappointing to see sales in North America fall short of expectations for the second quarter in a row, with sales up almost 3% year over year. Even though sales increased from last year, earnings before interest and taxes (EBIT), a measure of operating income of $1.014 billion (excluding tariff refunds), were down from $1.045 in the same period last year. China was actually a little better than what analysts feared, but we won’t cheer a 12% year-over-year revenue decline. This is still a problem area that management has not be able to solve. EBIT fell 20% year over year. Both Asia Pacific & Latin America (APLA) and Europe Middle East & Africa (EMEA) regional sales beat Street expectations. By channel, Nike’s wholesale revenue — products sold to third-party retailers — increased 4% on a reported basis and 1% on a currency-neutral basis to $6.6 billion, with growth primarily in North America, partially offset by declines in Greater China. Nike Direct revenue dropped 7% on a reported basis and 9% on a currency-neutral basis to $4.1 billion, reflecting a 12% decline from digital and 7% decrease in Nike-owned stores. The unit reported a small EBIT gain of $23 million, an improvement from the third quarter’s loss of $40 million. Converse sales fell 32% year over year on a reported basis to $244 million, marking a similar drop from the prior quarter. As for inventories, Nike reported roughly flat levels compared to last year, reflecting an increase in units, offset by shifts in product mix. Inventory was also about flat on a sequential basis. Guidance On the previous earnings call, the company provided guidance for the reported quarter and the first two quarters of fiscal 2027, with revenues to be down low single digits year over year, gross margins to inflect in the second quarter, and earnings to be flattish year over year over this period. We were relieved to hear that management is reiterating its expectation of flattish earnings over this period – another round of cuts would have taken the stock down even more. But some parts of the outlook have changed. Management is sacrificing some near-term revenue by tightening buys, reducing future markdowns, and better managing inventory to improve the business over the long run. This means gross margins will improve one quarter sooner. (Jim Cramer’s Charitable Trust is long NKE. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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