Nike Inc Earnings - Q4 2025 Analysis & Highlights
Nike Inc. Q3 2026 earnings call focused on the company's ongoing "Win Now" turnaround strategy, with management emphasizing progress in sport performance categories and wholesale partnerships while acknowledging that marketplace cleanup and inventory management actions are creating near-term headwinds to revenue and profitability.
Key Financial Results
Revenues were flat on a reported basis and down 3% on a currency-neutral basis for Q3 2026.
Gross margins declined 130 basis points to 40.2% on a reported basis, primarily due to 300 basis points associated with higher tariffs in North America.
SG&A was up 2% on a reported basis versus the prior year due to employee severance charges incurred in the quarter.
Earnings per share was $0.35.
Inventory decreased 1% versus the prior year, with units down mid-single digits.
A $230 million charge was incurred this quarter due to employee-related severance costs, primarily in supply chain and technology.
Business Segment Results
Nike Running was up over 20% for the quarter, demonstrating the success of the Sport Offense strategy.
Nike Direct declined 7% with Nike Digital declining 9% and Nike Stores down 5%.
Wholesale grew 1% overall.
In North America, Q3 revenue grew 3%, with Nike Direct declining 5%, Nike Digital down 7%, Nike Stores down 1%, and wholesale growing 11%.
Running and Global Football grew double digits in North America with basketball up high single digits, while Sportswear declined double digits.
In EMEA, Q3 revenue was down 7%, with Nike Direct declining 13%, Nike Digital down 6%, Nike Stores down 20%, and wholesale down 4%.
In Greater China, Q3 revenue declined 10%, with Nike Direct declining 5%, Nike Digital down 21%, Nike Stores up 1%, and wholesale declining 13%.
Running grew double digits in Greater China, and the company also saw growth in tennis, golf and ACG with Kids' flat.
In APLA, Q3 revenue was down 2%, with Nike Direct declining 8%, Nike Digital down 12%, Nike Stores down 3%, and wholesale up 3%.
Sportswear declined double digits across all geographies as the company intentionally removed unhealthy inventory from classic footwear franchises.
Capital Allocation
The company incurred $230 million in severance charges related to workforce reductions in supply chain and technology to reset the cost base and improve long-term profitability.
Management indicated they continue to evaluate opportunities related to supply chain, which could result in additional financial impacts in future quarters.
Industry Trends and Dynamics
The athletic industry is viewed as a tremendous opportunity for Nike to continue driving growth in an expanding market.
Sportswear will remain a very large part of the overall industry and will be critical to Nike's success moving forward.
The marketplace has experienced higher levels of promotional activity, particularly in EMEA, with markdowns across the marketplace remaining elevated.
Sell-through trends are not yet where management wants them to be, with digital remaining too promotional despite progress versus a year ago.
Competitive Landscape
Nike is working to take back shelf space and rebuild market share through strengthened wholesale partnerships.
Wholesale relationships with partners are strong, with order books growing and the company taking back shelf space.
Nike is competing to win back market share in the wholesale business, the environment where the majority of consumers shop.
The company executed strong partnerships during the NBA All-Star weekend, deepening wholesale relationships in Los Angeles with Shoe Palace, DICK'S and Foot Locker.
Macroeconomic Environment
Higher tariffs in North America created a 300 basis point headwind to gross margins in Q3 2026.
The first quarter of fiscal 2027 is expected to be the final quarter where higher tariffs continue to be a material year-over-year headwind to gross margin, assuming no significant changes in the tariff environment.
The company experienced traffic disruption from the Middle East, which impacted EMEA performance and is being considered in forward guidance.
Rising oil prices and other macroeconomic factors could impact input costs or consumer behavior, creating potential unplanned volatility.
Growth Opportunities and Strategies
The "Win Now" strategy focuses on removing unhealthy inventory, which created roughly a 5-point headwind to reported results but is improving the health of the marketplace and foundation for sustainable growth.
Nike is implementing a Sport Offense strategy focused on athlete-centered innovation, building platforms that can scale across multiple sports and price points.
The company is rebalancing from a Nike Direct-first offense to an integrated and elevated marketplace with a key city offense approach.
Nike Mind platform with over 150 patents filed globally was launched this quarter, designed to help athletes clear away distractions pre and post competition, with the Mind 001 selling out in all geographies.
Several early-stage innovation platforms were introduced, including Nike Air as a self-inflated thermal layer in apparel, a new Liquid Air Max platform, and Aero-FIT for football with 200% increased airflow over regular dry fit.
Nike is implementing a more sophisticated city offense in Sportswear and Jordan Streetwear, incubating new styles through different consumers and channels account by account.
The company is taking a street-up approach to Sportswear, making the business feel more local and working more closely with wholesale partners to improve point-of-sale storytelling.
Greater China strategy includes cleaning the marketplace, tightening execution across digital and physical retail, and rebuilding the brand locally through sport.
Nike is expanding its NIKE store pilot to 100 doors in Greater China, including the House of Innovation door in Shanghai, with focus on assortments, storytelling and replenishment.
The company is investing in technology platforms to help serve more consumers better and run the business more effectively.
An Investor Day will be held in the fall at the Philip H. Knight campus in Beaverton to share a more detailed, long-term view of the business.
Financial Guidance and Outlook
Revenues are expected to be down low single digits versus the prior year through the end of the calendar year, with gains in North America offset by declines in Greater China.
Gross margin expansion is expected to begin in the second quarter of fiscal 2027 due to actions to mitigate tariffs and recovery of transitory impacts from Win Now.
Earnings are expected to be flattish through the end of the calendar year, with gross margins beginning to inflect and disciplined SG&A management setting the foundation for earnings recovery.
Q4 fiscal 2026 revenues are expected to be down 2% to 4% with modest growth in North America, largely offset by declines in Greater China and Converse.
Greater China is expected to be down approximately 20% in the fourth quarter, reflecting reduced sell-in and accelerated actions to clean up the marketplace.
A 2-point benefit from foreign exchange is anticipated in Q4.
Q4 gross margin is expected to be down approximately 25 to 75 basis points, including 250 basis points due to higher tariffs in North America.
Q4 SG&A dollars are expected to be flat to down slightly.
Other expense, net of interest income is expected to be an expense of $15 million to $25 million in the fourth quarter.
The full year tax rate is expected to be in the low 20% range.
Benefits from severance and cost reduction actions are expected to begin in fiscal 2027 and continue to build through fiscal 2028.
The company expects to complete Win Now actions by the end of the calendar year, with aged inventory across the marketplace becoming healthy.
North America is expected to return to balanced growth across both Nike Direct and wholesale channels in the near term.
Organizational and Operational Changes
New leadership has been put in place in Greater China, EMEA, Converse and Sportswear to strengthen these businesses over the long term.
The company is rewiring its supply chain and upgrading technology platforms as part of the shift to an integrated marketplace model.
Supply chain actions will lower costs, streamline operations and reduce capacity in the distribution network, shifting toward a more variable cost structure.
In technology, the company is continuing to optimize its workforce, rationalize programs and leverage new advanced capabilities.
