Nike Inc., the world’s largest supplier of athletic shoes and apparel and a major manufacturer of sports equipment, in its Q3 earnings call discussed their strategic reset focused on clearing excess inventory through wholesale returns while elevating their marketplace to a full-price presentation. Management emphasized on their “Win Now” strategy, highlighting successful new product launches like the Peg Premium and Vomero 18, while explaining efforts to better integrate direct and wholesale channels. The company outlined its approach of managing overhead tightly while increasing demand creation investment by 8%. NKE also address challenges in key markets, particularly China, where they acknowledge increased competition but remain committed to their long-term strategy of elevating product storytelling, improving retail presentation, and returning to growth.
Nike projected sales declines in the mid-teens range for 3Q, resulting in its shares plummeting to a five-year low and market value dropping to $106 billion. The company faces many challenges, including President Trump’s new 20% tariffs affecting a quarter of its suppliers, weakening consumer confidence globally, intense competition from upstart brands like Hoka and On, and shifting consumer preferences toward basics rather than premium athletic wear. Performance was particularly weak in China, with sales down 17% and North America, down 9%. Overall profits declined 32% year-over-year despite narrowly beating lowered expectations. The company warned that gross margins could decline 400-500 basis points as, it works through outdated inventory with deep discounts.
Continue Reading: Unearth the Vital Insights from Nike Inc.’s Earnings Call!
Financial/Operational Metrics:
Revenue: $11.3 billion, down 9% YoY.
Net Income: $794 million, down 32% YoY.
GAAP EPS: $0.54, down 30% YoY.
Gross Profit: $4.68 billion, down 16% YoY.
4Q Outlook:
Revenue: Expected to decline mid-teens.
Gross Margin: Expected to decline 400-500 basis points.
SG&A: Expected to increase low to mid-single digits.
Analyst Crossfire:
Classic Shoe Inventory Cleanup Timeline (Lorraine Hutchinson – BofA): The company emphasized that NIKE is rightsizing classic franchises (Air Force 1, Dunk, AJ1) rather than eliminating them. By the end of Q4, their contribution to the overall footwear mix will be reduced by 10 percentage points, with further reductions planned for FY26. The cleanup in NIKE Direct will be quicker, while wholesale will take the first half of FY26 (Elliott Hill – CEO, Matthew Friend – CFO).
Wholesale Channel & Order Book Trends, Innovation & Product Pipeline (Lorraine Hutchinson – BofA, Brooke Roach – GS): Wholesale partners are seeing growth in performance categories and new sportswear, almost offsetting declines in classic franchises. NIKE is making strategic investments in digital and wholesale channels, ensuring Air Force 1 inventory stabilizes first. NIKE is balancing long-term innovation through the LeBron James NIKE Sports Research Lab and short-term product refreshes. Recent successes include 24/7 apparel, Vomero 5, P-6000, Shox, and Air Max Muse. The Spring ’26 product review generated excitement among wholesale partners, signaling strong momentum (Matthew Friend – CFO, Elliott Hill – CEO).
Performance vs. Classics Inflection Point, Gross Margin & Inventory Liquidation Impact (Aneesha Sherman – Bernstein): NIKE expects performance categories to offset classic footwear declines by Spring ’26. The key factor will be how quickly the marketplace is cleaned up and repositioned for innovation. Company is resetting digital and physical channels to maximize sell-through and drive future order growth. NIKE anticipates Q4 to be the most impacted by Win Now actions, with revenue and margin headwinds moderating from FY26 onwards. While full-price sales in digital and wholesale will improve, inventory liquidation efforts will continue for several quarters but will be managed through familiar value channels (Elliott Hill – CEO, Matthew Friend – CFO).
Promotions & Inventory Management, SG&A & Demand Creation Strategy (Simeon Siegel – BMO): NIKE is transitioning both digital and physical retail channels to full-price presentations while using value stores for excess inventory clearance. Running products like Peg Premium and Vomero 18 exemplify the strategy of driving premium sell-through while clearing old stock. NIKE is tightly managing overhead while increasing demand creation investment. Recent spending on Super Bowl, NBA All-Star Weekend, and key product launches has been impactful. Cost efficiency improvements in direct-to-consumer and wholesale operations have also helped reduce expenses (Matthew Friend – CFO, Elliott Hill – CEO).
Wholesale Margins & Profitability, China Strategy & Competitive Landscape (Alex Straton – MS, Randy Konik – Jefferies): NIKE is resetting wholesale discount rates to historical levels, ensuring long-term profitability for both NIKE and its partners. Despite past volatility due to supply chain disruptions, this approach will improve competitiveness while enabling further investment in brand presentation at retail. NIKE remains committed to China’s 1.3 billion consumers and is making strategic investments in national sports teams, local product creation, and brand elevation. However, competition has intensified, requiring a faster execution of NIKE’s Win Now strategy, particularly in cleaning up promotional activity and refocusing on performance-led storytelling (Matthew Friend – CFO, Elliott Hill – CEO).
