NIKE, Inc. (NKE) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture. While North America shows growth, EMEA and Greater China face declines, impacting overall sentiment. Positive aspects include inventory management and some product successes, but gross margins and revenue guidance are weak. The Q&A highlighted management's plans to address challenges and focus on performance categories, but uncertainties remain, especially in EMEA. Despite some optimistic future guidance, the immediate impact is tempered by current financial strains and geopolitical issues, leading to a neutral sentiment.
Key Financial Performance
Revenue Revenues were flat on a reported basis and down 3% on a currency-neutral basis year-over-year. This was impacted by intentional actions to clean up inventory and manage the marketplace.
NIKE Direct Revenue NIKE Direct was down 7%, with NIKE Digital declining 9% and NIKE stores down 5% year-over-year. This decline was attributed to promotional activities and marketplace adjustments.
Wholesale Revenue Wholesale grew 1% year-over-year, driven by new distribution and lapping marketplace management actions with existing partners in the prior year.
Gross Margins Gross margins declined 130 basis points to 40.2% on a reported basis year-over-year. This was primarily due to 300 basis points associated with higher tariffs in North America.
SG&A Expenses SG&A was up 2% on a reported basis year-over-year due to employee severance charges incurred in the quarter.
Earnings Per Share (EPS) Earnings per share was $0.35, reflecting the impact of severance costs and other income from legal settlements.
Inventory Inventory decreased 1% year-over-year, with units down mid-single digits. This reflects efforts to manage inventory levels and improve marketplace health.
North America Revenue North America revenue grew 3% year-over-year. Growth was driven by double-digit increases in Running and global football, while Sportswear declined double digits.
North America Gross Margins North America gross margins declined 360 basis points year-over-year, primarily due to nearly 650 basis points of gross impact from new U.S. tariffs.
EMEA Revenue EMEA revenue was down 7% year-over-year. Sportswear declined double digits, and promotions across the marketplace were elevated.
Greater China Revenue Greater China revenue declined 10% year-over-year. Sportswear declined double digits, while Running grew double digits. Actions were taken to clean up the marketplace and reduce sell-in.
APLA Revenue APLA revenue was down 2% year-over-year. Running grew double digits, while Sportswear declined double digits. Inventory grew high-single digits, but units declined low-single digits.
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Operating Highlights
Nike Mind platform: Introduced with over 150 patents globally, designed to help athletes clear distractions pre and post competition. Mind 001 sold out in all geographies, leading to doubled production for the next two seasons.
Innovative product platforms: Introduced Nike Air as a self-inflated thermal layer, Liquid Air Max platform for natural foot movement, and Aero-FIT for football with 200% increased airflow. These platforms are scalable across sports and price points.
Nike Running: Achieved over 20% growth this quarter, showcasing a clear product construct and athlete insights.
Global football transformation: Elevated presence in over 5,000 football doors globally, leveraging the World Cup to catalyze the football marketplace.
North America wholesale momentum: Wholesale grew 11% in North America, driven by partnerships with DICK'S, Foot Locker, and others. Positive growth achieved in all channels for the first time in two years.
Emerging markets and outdoor segment: ACG brand showcased at Winter Olympics, expanded to over 600 retail doors globally, including a standalone store in Beijing.
Inventory management: Removed unhealthy inventory from classic footwear franchises, improving marketplace health and revenue quality.
Supply chain and technology optimization: $230 million charge for employee severance in supply chain and technology to streamline operations and reduce fixed costs.
Digital and wholesale integration: Rebalancing offense through integrated marketplace strategies, improving sell-through and reducing markdowns.
Win Now actions: Focused on reshaping marketplace, rewiring operations, and investing in technology platforms to strengthen long-term growth.
China market strategy: Implemented structural changes to clean up digital and physical retail channels, rebuild brand locally, and align sell-in with full-price demand.
Sportswear repositioning: Reduced over $4 billion in revenue from classic footwear franchises to focus on new styles and city-led approaches.
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Risk or Challenges
Unhealthy Inventory: The company faced a 5-point headwind to reported results due to the removal of unhealthy inventory from the marketplace, which created near-term pressure on financial performance.
Sportswear Decline: Sportswear revenue declined double digits, creating a headwind to overall revenue growth and impacting sell-through trends.
Promotional Marketplace: The marketplace remains highly promotional, with elevated markdowns and off-price sales, particularly in digital channels, negatively affecting gross margin profitability.
Tariffs in North America: Higher tariffs in North America caused a 300 basis point decline in gross margins, significantly impacting profitability.
Greater China Challenges: Revenue in Greater China declined 10%, with structural challenges, channel dynamics, and aged inventory issues requiring ongoing marketplace management actions.
Supply Chain and Technology Costs: Employee severance charges and higher fixed costs in supply chain and technology investments weighed on EBIT margins, necessitating cost restructuring.
Converse Performance: Converse experienced revenue declines and required decisive actions to stabilize the brand, impacting overall financial performance.
Inventory Management: Elevated inventory levels in certain regions, including EMEA and APLA, remain a challenge, with closeout units and promotional activity still high.
Economic and Geopolitical Risks: Disruption in the Middle East, rising oil prices, and other macroeconomic factors could impact input costs and consumer behavior, adding uncertainty to future performance.
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Guidance & Outlook
Revenue Expectations: Revenues are expected to be down low single digits versus the prior year, with gains in North America offset by declines in Greater China due to intentional reduced sell-in and marketplace management actions.
Gross Margin Projections: Gross margin expansion is expected to begin in the second quarter of fiscal '27 due to actions to mitigate tariffs and recovery of transitory impacts from 'Win Now' actions. The first quarter of fiscal '27 is expected to be the final quarter where higher tariffs are a material headwind.
Earnings Projections: Earnings are expected to be flattish in the near term, with gross margins beginning to inflect and disciplined SG&A management setting the foundation for earnings recovery.
Q4 Fiscal '26 Revenue Outlook: Revenues in Q4 are expected to decline 2% to 4%, with modest growth in North America offset by a 20% decline in Greater China and declines in Converse.
Q4 Fiscal '26 Gross Margin Outlook: Gross margin in Q4 is expected to decline approximately 25 to 75 basis points, including a 250 basis point impact from higher tariffs in North America.
Long-Term Guidance: Full year and long-term guidance will be provided at the Investor Day in the fall.
Market Recovery Assumptions: The company anticipates balanced growth in North America across both NIKE Direct and wholesale channels in the near term. However, Greater China is expected to face headwinds to revenue growth throughout fiscal '27 due to marketplace management actions.
Strategic Plans: The company plans to complete its 'Win Now' actions by the end of the calendar year, focusing on cleaning up inventory, improving gross margins, and resetting its cost base to improve long-term profitability. Additionally, new product innovations and technology platform upgrades are expected to drive future growth.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:The performance in the EMEA seems to have decoupled from some of the early successes you've seen in North America. How do you diagnose the problems? And what's the strategy to fix it?
A:Management acknowledged challenges in EMEA, including lower-than-expected sell-through in Sportswear, macro pressures, traffic disruptions, and promotional activity. They are addressing these issues through 'Win Now' actions, inventory management, and focusing on performance categories like Running and Training. A new leader, César Garcia, has been appointed to drive improvements.
Q:Can you provide clarity on revenue guidance, particularly for the February quarter and the May quarter?
A:Management expects revenue to be down low-single digits over the next 9 months, with North America showing modest growth and Greater China facing headwinds. Margins are expected to inflect positively in Q2, driven by cost management and reduced sell-in in Greater China.
Q:Can you share insights on D2C gross margins and the health of that channel?
A:Management emphasized the importance of an integrated marketplace, balancing D2C with wholesale. North America showed improvement in D2C quality, with strong digital performance, reduced discounts, and positive growth across all channels for the first time in two years.
Q:Can you provide details on EMEA's Q4 outlook, including revenue and margin expectations?
A:Management expects continued growth in performance categories like Running and Training, but Sportswear challenges and Middle East traffic disruptions will impact revenue. Margins in EMEA were strong in Q3 despite revenue declines, and management is carefully managing the marketplace.
Q:What is the opportunity to stabilize the Sportswear business, and are there any green shoots in North America?
A:Management is moving from defense to offense in Sportswear, focusing on performance products to drive authenticity and halo effects. Key franchises like Air Force 1 and AJ1 have stabilized, and new launches have shown strong sell-through. However, work remains to stabilize Dunks and further improve the portfolio.
Q:Why is the turnaround process taking longer than expected?
A:Management cited both internal and external factors, including varying starting points and marketplace structures across geographies. They are reorganizing teams and focusing on integrated marketplaces, but external challenges like macroeconomic conditions have also played a role.
Q:What is the health of the global sportswear backdrop, and how does it compare to when you took the helm?
A:Management remains positive on the athletic industry and sees Sportswear as a critical growth driver. They are taking a localized approach to stabilize and grow the business, emphasizing its importance to the overall market.
Q:Can you parse out self-inflicted headwinds versus underlying demand in the revenue guidance?
A:Management expects North America to sustain momentum with balanced growth across channels, while EMEA and APLA are expected to complete 'Win Now' actions by year-end. Greater China will see managed sell-in to improve sell-through and profitability, creating a healthier foundation for future growth.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the specific severance costs booked into operating overhead, providing no clear quantification of the $230 million mentioned. Additionally, they did not provide detailed guidance on EMEA's Q4 margins despite being asked about positive offsets.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ACG
America SGA
FIT
Investor Day
NIKE Mind
NIKE Sportswear
NIKE store
NIKE term
Running Sport
Sport Offense
Sportswear digit
Trussell
World Cup
action end
brand sport
chain technology
charge
city offense
comeback
cost base
decline sell
digit sell
digit unit
disruption Middle
employee severance
end calendar
fall
foundation progress
highlight
inventory digit
marketplace action
marketplace point
network
part
place Win
presence
quality foundation
specialty
urgency
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The earnings call presents a mixed picture. While North America shows growth, EMEA and Greater China face declines, impacting overall sentiment. Positive aspects include inventory management and some product successes, but gross margins and revenue guidance are weak. The Q&A highlighted management's plans to address challenges and focus on performance categories, but uncertainties remain, especially in EMEA. Despite some optimistic future guidance, the immediate impact is tempered by current financial strains and geopolitical issues, leading to a neutral sentiment.
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The earnings call reveals several challenges: declining revenues in key regions, margin pressures, and digital traffic headwinds. While there are positive aspects like growth in North America and strategic initiatives, the overall sentiment is dampened by significant headwinds in Greater China and digital channels. The Q&A section highlights management's confidence but also reveals uncertainties, especially in China. The lack of clear guidance and the impact of tariffs further contribute to a negative outlook. Given these factors, a negative stock price reaction is expected over the next two weeks.
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
