Nike Edges Lower Despite Q3 Win Amid Tariff-Related Worries, Weak Q4 Guidance

• The company’s troubles continue in its Greater China market, where revenue fell 7% to $1.62 billion.
• Nike said on Tuesday that it ended the quarter with $8.49 billion in inventory, down 1% from the corresponding quarter last fiscal year.
• Nike is currently in the middle of a multi-year turnaround strategy led by CEO Elliott Hill, who took over in late 2024 to reverse a period of slowing sales and lost market share.

Shares of sneaker giant Nike Inc (NKE) fell 9% after hours on Tuesday after the company recorded a drop in third quarter (Q3) gross profit margin amid tariff-related uncertainty and put forth weak fourth quarter revenue outlook.  

The company’s third quarter earnings and revenue beat Wall Street expectations. While diluted earnings per share for the period came in at $0.35, above an analyst estimate of $0.28, revenue came in at $11.28 billion, flat year-over-year but above the $11.22 billion expected by analysts.

The company’s troubles continue in its Greater China market, where revenue fell 7% to $1.62 billion. However, the company clocked growth in its home market in North America as revenue climbed 3% to $5.03 billion.

Nike’s gross profit margin slid 130 basis points to 40.2%, primarily owing to higher tariffs in North America.  

Nike is currently in the middle of a multi-year turnaround strategy led by CEO Elliott Hill, who took over in late 2024 to reverse a period of slowing sales and lost market share. The turnaround involves repairing relations with retailers after a former direct-to-consumer push and cleaning up excess inventory, among other measures.

Nike said on Tuesday that it ended the quarter with $8.49 billion in inventory, down 1% from the corresponding quarter last fiscal year primarily reflecting a decrease in units and product mix shifts but partially offset by increased product costs, primarily due to Trump’s tariffs.

Q4 Outlook of Nike

The company now expects fourth quarter revenue to be down 2%-4%, owing to declines in Greater China and Converse brand revenues.

For the remaining calendar year, the company expects revenues to be down “low single digits” versus the prior year, with gains in North America offset by declines in Greater China.

“We expect the first quarter of fiscal 2027 to be the final quarter where higher tariffs continue to be a material year-over-year headwind to gross margin,” Nike CFO Matt Friend said while also warning that the company’s guidance presupposes that the geopolitical situation remains as is.

“...the environment around us has become increasingly dynamic, and we could experience unplanned volatility due to the disruption in the Middle East, rising oil prices, and other factors that could impact either input costs or consumer behavior. We are focused on what we can control, and these assumptions reflect the macro environment as it stands today,” he added.

Hill’s Turnaround Efforts

In October, Hill highlighted the complexity involved in turning around the fortunes of a company like Nike.

“It’s gonna take a while. It’s not linear. But it is a portfolio, and ultimately the goal is to have the entire portfolio all working together to drive the revenue and the profit that we hope to deliver for all of our investors,” Hill said in an interview.

Hill reiterated the opinion on Tuesday and said, “"This quarter we took meaningful actions to improve the health and quality of our business. The pace of progress is different across the portfolio and the areas we prioritized first continue to drive momentum.”

How Did Stocktwits Users React?

On Stocktwits, retail sentiment around NKE stock rose from ‘bullish’ to ‘extremely bullish’ territory over the past 24 hours, while message volume increased from ‘high’ to ‘extremely high’ levels.

NKE stock has lost 17% over the past 12 months. 

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