Nike Inc. Earnings Call Maps Painful Reset Path

Nike Inc ((NKE)) has held its Q3 earnings call. Read on for the main highlights of the call.

Nike Inc.’s latest earnings call painted a cautiously optimistic picture, as management balanced solid progress in core performance categories with significant near‑term financial pressure. Executives stressed that current revenue and margin headwinds are the result of deliberate strategic choices, aimed at cleaning up the marketplace and positioning the brand for healthier, more sustainable growth from fiscal 2027 onward.

Running Leads the ‘Sport Offense’

Nike’s Running division was the standout, delivering more than 20% growth and driving double‑digit gains across several regions despite broader softness. Management positioned Running as the first category to fully execute the company’s new “sport offense” strategy, framing it as a blueprint for how other sports will be scaled and marketed over the next few years.

Innovation Engine: NIKE MIND and Next‑Gen Platforms

Product innovation was a bright spot, with NIKE MIND selling out globally and more than 2 million consumers registering for notifications, prompting plans to double production over the next two seasons. The company also touted over 150 patent filings and highlighted new technologies such as AeroFit, which offers a 200% airflow improvement versus standard Dri‑FIT, and a new liquid Air Max platform.

North America Shows Early Momentum

In North America, revenue grew 3% in the quarter, underscoring improving demand in the company’s largest market despite channel mix challenges. Wholesale rose 11% while Nike Direct declined 5% and digital sales fell 7%, but management noted February sell‑through improved and the region delivered positive growth across all channels for the first time in two years.

Wholesale and Marketplace Relationships Rebound

Company‑wide wholesale revenue grew 1%, with particular strength in North America where partners expanded shelf space and order books. Key retailers such as Dick’s, Foot Locker and Shoe Palace were cited as examples of renewed collaboration, signaling a more balanced marketplace strategy after years of heavy emphasis on direct‑to‑consumer.

Selective Profitability Despite Revenue Declines

Even as revenue fell in some regions, Nike showed it can manage margins locally, with EBIT up 7% in EMEA and 11% in Greater China in the quarter on a reported basis. Management framed these gains as proof of tighter cost control and more disciplined pricing and inventory management, even in tougher markets.

Greater China Inventory Cleanup Underway

In Greater China, inventory dollars declined in the mid‑teens and units fell more than 20%, with partner inventory also down double digits. Executives emphasized that this reflects deliberate sell‑in discipline and marketplace cleanup, accepting near‑term revenue hits in exchange for a healthier product mix and improved long‑term demand fundamentals.

‘Win Now’ Actions Drive Short‑Term Pain

Nike reiterated that its “Win Now” program will be completed by the end of the calendar year, including targeted removal of unhealthy inventory that creates an intentional roughly 5‑point headwind to near‑term revenue. Leadership changes in key regions and an upcoming Investor Day are meant to solidify the next phase of the strategy and clarify the company’s long‑term financial trajectory.

Roadmap to Margin Inflection in Fiscal 2027

The company laid out a clear path for gross margin expansion beginning in the second quarter of fiscal 2027, as current tariff impacts subside and temporary Win Now pressures roll off. Management also expects sequential margin improvement starting in the fourth quarter, positioning fiscal 2027 as the turning point when structural tailwinds should overtake the short‑term drags.

Revenue Under Pressure Across the Portfolio

Overall, third‑quarter revenue was flat on a reported basis and down 3% on a currency‑neutral basis, reflecting broad‑based softness and strategic pullbacks. Looking ahead, leadership expects revenues to decline low single digits over the next nine months, with fourth‑quarter sales guided down 2% to 4% as the company works through its reset.

Weakness in Digital and Direct Channels

Nike Direct revenue fell 7% and Nike Digital declined 9% in the quarter, signaling that consumer demand in the company’s own channels remains under pressure. Greater China was particularly weak, with digital revenue down 21% and Direct down 5%, highlighting that the brand’s digital pivot is facing both macro and self‑inflicted headwinds.

Sportswear Franchises Drag on Growth

Sportswear, historically a key growth and margin driver, declined in the low‑to‑mid double digits and was singled out as a major drag on overall performance. Management said it is intentionally pulling back classic footwear inventory and expects a multi‑quarter recovery as it refreshes franchises and rebalances supply to demand.

Tariffs and Gross Margin Compression

Gross margin fell 130 basis points to 40.2% in the quarter, with management pointing to more than 300 basis points of pressure from higher U.S. tariffs alone. North America gross margin declined roughly 360 basis points year over year and absorbed about 650 basis points of gross impact from new tariffs, underscoring how policy risk is hitting profitability.

Restructuring Costs Reset the Cost Base

Nike recorded a $230 million employee‑related severance charge, largely in Supply Chain, Technology and at Converse, which pushed SG&A higher in the near term. Executives framed the restructuring as a necessary step to reset the cost base and support future margin expansion once revenue growth re‑accelerates.

EMEA Faces Inventory and Promotional Challenges

In EMEA, revenue fell 7%, with Nike Direct down 13% and company‑owned stores down 20% amid elevated promotional activity. Inventory in the region grew double digits and management expects it to remain high entering the fourth quarter, suggesting continued pressure on pricing and profitability in the near term.

Greater China Revenue to Decline Further Near Term

Greater China revenue declined 10% in the quarter, and management warned that the region will remain a sizable drag as sell‑in is intentionally reduced. For the fourth quarter, Nike expects Greater China revenue to fall around 20% as it continues marketplace cleanup and prioritizes quality of sales over headline growth.

Macro and Geopolitical Risks Remain Elevated

Executives also flagged broader macroeconomic and geopolitical uncertainties, including tariffs, conflict in the Middle East and rising oil prices. These factors could inject volatility into input costs and consumer behavior, adding another layer of risk to an already complex turnaround and margin‑recovery story.

Guidance: Short‑Term Decline, Long‑Term Margin Rebuild

Looking ahead, Nike expects revenues over the next nine months to decline low single digits year over year, with modest growth in North America offset by sizable declines in Greater China and other pressured regions. The company forecasts fourth‑quarter revenue down 2% to 4%, modest sequential gross‑margin improvement despite a 250‑basis‑point tariff hit, roughly flat earnings with disciplined SG&A, and a turn to gross‑margin expansion starting in the second quarter of fiscal 2027 once tariff and Win Now effects fade.

Nike’s earnings call ultimately presented a transition story, with strong execution in performance categories and innovation offset by deliberate cuts to weaker franchises and regions. For investors, the near term is likely to feature sluggish revenue and compressed margins, but management is clearly betting that today’s reset will lay the foundation for a more durable, higher‑quality growth profile later in the decade.