- Nike guided for a 2% to 4% revenue decline in the current quarter and low single-digit declines for the rest of the calendar year, well below analyst expectations of 2% growth
- The company is facing headwinds from elevated inventories in Europe and the Middle East, war-related traffic disruption, and a Greater China business expected to drop ~20% next quarter
- Nike shares fell 9.1% in after-hours trading and are down 17% year-to-date, complicating CEO Elliott Hill’s efforts to restore the brand’s market dominance
- North America remains a relative bright spot with strong order books for summer, but weakness in Converse and the sportswear division — hit by double-digit declines and heavy discounting — remain key concerns
What Happened?
Nike delivered a surprising downbeat outlook on its earnings call Tuesday, projecting a 2% to 4% revenue decline in the current quarter and low single-digit declines for the remainder of the calendar year. Analysts had expected 2% growth this quarter and acceleration through year-end. Fiscal Q3 revenue came in at $11.3 billion — flat year-over-year but above consensus estimates. While North American consumers showed resilience, fresh setbacks emerged in Europe and the Middle East, where elevated inventories and war-related traffic disruption are weighing heavily. Greater China is expected to decline approximately 20% next quarter amid economic slowdown, a property crisis, and intensifying local competition. Nike shares fell 9.1% in after-hours trading.
Why It Matters?
CEO Elliott Hill, who took over to turn around a company in a prolonged sales slump, acknowledged the work is “taking longer than I’d like” — a rare candid admission of execution challenges. The Iran war is emerging as a significant variable for multinational consumer brands, disrupting foot traffic and supply chains across Europe and the Middle East. Meanwhile, Nike’s sportswear division — historically a cash cow — experienced double-digit declines last quarter amid high discounting, and its Converse brand is showing steeper-than-expected weakness, even attracting acquisition interest from Authentic Brands. China, once a growth engine, is now a drag as consumers pull back and local competitors fill the void. For investors, Nike is becoming a multi-front battle: war disruption in EMEA, structural decline in China, and a core brand that needs rebuilding at home.
What’s Next?
Hill is doubling down on Nike’s core sports identity — basketball, running — and working to recover shelf space lost to competitors in North America, where order books for summer are reportedly strong. The company plans to host an investor day in the fall to provide longer-term guidance, suggesting management wants more time to demonstrate traction before making commitments. Key watch items include the trajectory of Converse (a potential sale is under discussion), the pace of China’s recovery, and whether the Iran war’s drag on EMEA proves temporary or structural. Analysts at Bloomberg Intelligence flagged that war impacts and tariff pressures on gross margin “will persist in the near term,” keeping pressure on the stock.
Source: Bloomberg
