Nike on Thursday warned that sales will drop by a double digit percentage in its current quarter, as the sneaker giant’s turnaround plan takes longer than expected while it contends with new tariffs and sliding consumer confidence.
In a conference call with analysts, finance chief Matt Friend said Nike expects its sales decline in the fiscal fourth quarter, which is set to end in May, to be at the “low end” of the “mid-teens range.” It also anticipates its gross margin will fall between 4 and 5 percentage points as it ramps up efforts to clear out excess inventory and stale styles that are no longer resonating with consumers.
“We believe that the fourth quarter will reflect the largest impact from our win now actions, and that the headwinds to revenue and gross margin will begin to moderate from there,” said Friend. “We are also navigating through several external factors that create uncertainty in the current operating environment, 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.”
The guidance is far worse than analysts had expected. Consensus estimates from LSEG show Wall Street had expected sales to be down 11.4% in the current quarter.
Shares fell more than 4% in extended trading and are down more than 5% year to date, as of Thursday’s close.
Beyond guidance, Nike beat Wall Street’s expectations in its fiscal third quarter.
Here’s how the company performed during the quarter, compared with estimates from analysts polled by LSEG:
- Earnings per share: 54 cents vs. 29 cents estimated
- Revenue: $11.27 billion vs. $11.01 billion estimated
The company’s reported net income for the three-month period that ended Feb. 28 was $794 million, or 54 cents per share, compared with $1.17 billion, or 77 cents per share, a year earlier.
Sales dropped to $11.27 billion, down about 9% from $12.4 billion a year earlier.
While Nike delivered a strong earnings beat, expectations were low headed into the release and profits fell 32% from the year-ago period.
During the quarter, Nike’s gross margin fell by 3.3 percentage points to 41.5%, lower than expectations of 41.8%, according to StreetAccount. That’s largely because of the costs associated with Nike’s efforts to clear out old inventory in favor of new, innovative styles. In a press release, the company attributed its drop in gross margin to “higher discounts, higher inventory obsolescence reserves, higher product costs and changes in channel mix.”
Meanwhile, sales were down 9%, driven by weakness in China. During the quarter, sales fell 17% in the key region to $1.73 billion, falling short of expectations of $1.84 billion, according to StreetAccount. Like other retailers, Nike saw strong demand in December followed by “double digit” declines in January and February.
Thursday’s release comes about five months into Elliott Hill’s tenure as CEO and his efforts to turn around the…
Read More: Nike (NKE) Q3 2025 earnings