Nike (NKE) Q3 2025 earnings

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 business and get it back to growth. He has focused on winning back wholesale partners, reigniting innovation and wooing back athletes that have fled to new competitors, but the work has not yet yielded results.

“I’ll start by saying I’m proud of the progress we made against the key actions we committed to 90 days ago. While we met the expectations we set, we’re not satisfied with our overall results,” Hill said on a call with analysts. “We can and will be better.”

During the quarter, sales on Nike’s direct channels dropped 12% to $4.7 billion. Wholesale revenue fell 7% to $6.2 billion.

Plus, since Hill took over, the company is now contending with a new set of dynamics that could make its comeback even harder to execute.

In the three months since Nike last reported earnings, President Donald Trump has put a new 20% tariff on goods imported from China, consumer sentiment has fallen, and retail sales in both January and February were weaker than expected.

Out of the hundreds of suppliers and manufacturers that Nike works with, about 24% of them are located in China, according to a manufacturing disclosure published in January. If the retailer doesn’t raise prices to offset tariffs and can’t push the cost entirely on to suppliers, Nike’s margins are expected to take a hit from the new duties.

Further, when consumers aren’t feeling confident and cutting back on spending, discretionary products like new clothes and shoes are one of the first things they cut out in favor of necessities. Over the last few years, the overall sneaker and apparel markets have been slow because consumers have cut back on clothes and shoes. But up until recently, strong companies were still performing well and taking market share from weaker competitors.

However, that trend began to shift over the last few weeks when even the strongest of companies started to sound the alarm about soft consumer spending when they reported first-quarter earnings, raising questions about the health of the economy.

During the quarter, sales in North America — Nike’s largest market — fell 4% to $4.86 billion. Still, revenue in the region came in better than the $4.53 billion analysts had expected, according to StreetAccount.

Nike is widely expected to reclaim the market share it lost and reset its business, and some insiders say the company’s problems have been overblown. Even so, the tariffs and economic fears could mean that the retailer’s turnaround could take longer, and be more difficult, than expected.

Nike has already made strides in winning back market share and growing its female customer base, a key component to boosting revenue and apparel sales. Last month, it announced it was teaming up with Kim Kardashian’s intimates brand Skims to create a new product line dubbed NikeSKIMS that will include apparel, footwear and accessories. The buzzy partnership is expected to give Nike improved inroads with women and allow it to better compete with Lululemon, Alo Yoga and Vuori, which cater more to women than Nike currently does.

Further, Nike debuted a new ad campaign geared toward female athletes during the Super Bowl, its first big game advertisement in decades. The campaign showed that reaching female athletes and capturing the buzz around women’s sports will be a center point of Hill’s strategy.

Analysts and investors are keen to know how new product launches are faring as the company restarts its innovation engine. Some analysts say clues into the product pipeline will be the most important detail coming out of Nike’s report because its ability to innovate and put out the best products in the industry is what made it the market leader in athletic apparel and shoes.

If it can show positive signs from new product launches, the rest of its headwinds might just be drowned out as noise.

This is breaking news. Please check back for updates.