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BusinessAI Desk•1 views

Nike's Disappointing Guidance Delays Turnaround

Nike reported flat revenue of $11.28 billion for Q3 fiscal 2026, with EPS dropping 35% to 35 cents. The company provided disappointing Q4 guidance, forecasting a revenue decline of 2-4% and gross margins below expectations, causing shares to fall 9% after-hours. CEO Elliott Hill cited complexities in the 'Win Now' turnaround strategy, including inventory clean-outs. Regional performance was mixed, with North America growing 3% and China declining 7%. Nike expects to complete its turnaround by year-end and will hold an investor day in the fall.

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Nike's Disappointing Guidance Delays Turnaround

Nike reported flat revenue and a significant decline in earnings for its third fiscal quarter, while issuing weak guidance that led to a sharp drop in its stock price. The company's "Win Now" turnaround strategy is facing more hurdles than expected.

Quarterly Financial Performance

  • Revenue: $11.28 billion, flat year-over-year, slightly above Wall Street estimates of $11.24 billion.
  • Earnings per share (EPS): 35 cents, down 35% from last year, but beating consensus of 29 cents.
  • Gross margins contracted by 130 basis points, better than the guided range of 175-225 bps decline.

Guidance and Market Reaction

  • Fourth-quarter revenue expected to decline 2% to 4%, worse than the FactSet consensus of 2.3% growth.
  • Gross margins projected to be down 25 to 75 basis points year-over-year, including a 250 bps headwind from tariffs, below the consensus estimate of a 50 bps improvement.
  • Shares fell 9% in after-hours trading, reaching lows since 2015, and are down 17% year-to-date.
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Strategic Challenges and Initiatives

  • CEO Elliott Hill acknowledged that the "Win Now" initiative is more complex than anticipated, with inventory clean-outs causing short-term pressure.
  • The company expects to complete "Win Now" actions by the end of the calendar year and plans an investor day in the fall.

Regional and Segment Performance

  • North America: Sales up 3%, but operating income (EBIT) fell 11%.
  • Greater China: Sales down 7% (10% currency-neutral), but EBIT rebounded to $467 million from a loss last quarter.
  • Converse: Sales fell 35% to $264 million, with an EBIT loss of $40 million.
  • Wholesale revenue up 5%, Nike Direct down 4%.

Inventory and Tariffs

  • Inventories declined 1% to $7.5 billion.
  • Tariffs expected to impact gross margins until Q1 fiscal 2027.
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