Nike said Thursday that reported revenues fell 9 per cent in the fiscal third quarter, to $11.3 billion. The quarterly results beat analyst expectations of $11.01 billion, but warnings that tariffs will have a significant impact on sales in the fourth quarter — up to a “mid-teen” decline, according to the brand — sent shares falling 5 per cent in after-hours trading.
“We believe that the fourth quarter will reflect the largest impact from our actions, and that the headwinds to revenue and gross margin will begin to moderate from there,” said CFO Matthew Friend during an analyst call on Thursday. “We are also navigating several external factors that create uncertainty, including geopolitical dynamics, new tariffs, volatile foreign exchange rates and tax regulations, as well as the impact of this uncertainty and other macro factors on consumer confidence.”
Sales in Q3 were hit especially hard by a 17 per cent sales plunge in China to $1.73 billion, where CEO Elliott Hill said competition was “a bit more aggressive” than he remembered following a December visit. North American sales, the company’s biggest market, were down 4 per cent to $4.86 billion, while EMEA (Europe, the Middle East and Africa) sales fell 10 per cent to $2.8 billion.
It’s the first quarter since Hill revealed his ‘Win Now’ strategy. Hill, a former Nike veteran, took over the role from John Donahoe in October to steer a turnaround for the company, which laid off more than 1,600 employees last year and has seen a string of negative quarters, with shares falling 28 per cent in the past year. Sales also fell 9 per cent in Q2.
Nike’s second-quarter revenues dropped 9 per cent, better than expectations. Shares ticked up as new CEO Elliott Hill broke down his turnaround plan.
The ‘Win Now’ strategy comprises refocusing on sport; moving quickly to clear the marketplace of outdated inventory and usher in new, innovative designs; revamping Nike’s marketing strategy; investing in new countries; and elevating brand perception.
“The progress we made against the ‘Win Now’ strategic priorities we committed to 90 days ago reinforces my confidence that we are on the right path,” said Hill in a statement. “What’s encouraging is Nike made an impact this quarter leading with sport — through athlete storytelling, performance products and big sport moments.”
For the third quarter, gross margin was down 330 basis points to 41.5 per cent as the company works to clear old inventory and make way for fresh designs, while inventory was down 2 per cent. Net income fell 32 per cent to $800 million in Q3. By channel, direct-to-consumer sales were down 12 per cent to $4.7 billion, while wholesale revenues fell 7 per cent to $6.2 billion. The brand reported an increase in marketing expenses of $1.1 billion.
The brand did not update its outlook for fiscal 2025, but the expected decline in the fourth quarter is worse than analysts anticipated. Tariffs loom large over US retail, and have been cause for concern for executives across industries. The Trump administration imposed 20 per cent duties on goods imported from China, one of Nike’s manufacturing countries, earlier this year. “The operating environment is dynamic, but what matters most for Nike is serving athletes with new product innovation and reigniting brand momentum through sport,” said Friend in a statement.
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