ii view: Nike trips on disappointing forecast

Third-quarter results to 28 February

• Revenue flat at $11.28 billion
• Adjusted earnings down 35% to $0.35 per share
• Shareholder returns of $609 million, up from $598 million in the second quarter

Guidance:

• Expects fourth-quarter revenues to fall by between 2% to 4%

Chief executive Elliott Hill said:

"This quarter we took meaningful actions to improve the health and quality of our business. The pace of progress is different across the portfolio and the areas we prioritized first continue to drive momentum," 

"The work is not finished, but the direction is clear, our teams are moving with focus and urgency, and our foundation is getting even stronger to build the future of Nike.”

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ii round-up:

Sporting goods maker Nike Inc Class B (NYSE:NKE) is forecasting weaker-than-expected sales for the current fourth quarter because of ongoing declines in China and potential disruption in the Middle East. 

Currency adjusted third-quarter sales for China to late February fell 10% to $1.61 billion, leaving group-wide sales for the quarter flat at $11.28 billion. Nike now expects current fourth-quarter sales to fall by between 2% and 4% compared to Wall Street predictions for a 2% gain.

Shares in the Dow Jones company fell 12% having come into these latest numbers down by close to a fifth so far in 2026. That’s similar to rival adidas AG (XETRA:ADS). The Dow Jones index is down by almost 4% year-to-date. 

Third-quarter earnings fell by just over a third from a year ago, impacted by a 1.3% drop in profit margin to 40.3%, largely a result of costs suffered in relation to US tariffs. Nike makes most of its goods in Asia and then exports to other markets including the USA.

Currency adjusted North American sales rose 3% to $5 billion, with a 6% gain for footwear demand offsetting 1% and 2% falls for equipment and apparel. 

Sales in the combined Europe, Middle East and Africa region rose 2% to $2.87 billion, with those for the Asia Pacific and Latin America region improving 1% to $1.49 billion.  

Converse branded sales for the quarter fell by just over a third to $264 million, leaving year-to-date sales down by a similar amount. 

On a channel basis, a 5% gain in wholesale revenues to other retailers such as JD Sports Fashion (LSE:JD.) and Dick's Sporting Goods Inc (NYSE:DKS) countered a 4% retreat in Direct-to-Consumer revenues.

A previously declared quarterly dividend payment of $0.41 per share is up from the prior quarter’s $0.40 per share. 

 ii view:

Started in 1964, the group takes its name from Nike, the Greek goddess of victory. Today the company employs over 75,000 people. Footwear generated most sales over its last financial year at 66%, with clothes at 28% and equipment the balance of 5%. Rivals include Puma SE (XETRA:PUM), New Balance, Under Armour and Skechers.  

Back under former chief executive Elliott Hill, Nike is pursuing a ‘Win Now’ transformation programme. Initiatives include reprioritizing sales to other retailers or use of its wholesale channel over direct sales, as well as pushing product innovation and group wide efficiency. 

For investors, trade tariffs now add to group costs given it manufactures products across Asia. Trade negotiations between the USA and China have likely increased consumer tensions. Soaring energy costs pressuring consumer incomes may now hinder demand, while a previous reliance on established brands like Jordans and product innovation from players such as New Balance have hindered sales and required increased marketing spend. 

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To the upside, a performance improvement programme under returning CEO Elliott Hill is ongoing. A diversity of both products and geographical locations exists. The football World Cup being held in the USA this summer may help boost demand, while increases in the dividend payment since 2004 now put the shares on forecast dividend yield of around 3%. 

In all, ongoing management initiatives give grounds for hope, and speculative investors may fancy a look given the shares are at an 11-year low. That said, more risk adverse investors may decide to await evidence of profit recovery before taking the plunge.

Positives: 

• Product and geographical diversity
• Ongoing shareholder returns

Negatives:

• Uncertain economic outlook
• Subject to currency moves

The average rating of stock market analysts:

Buy