Nike Shares Drop Nearly 10% Following Sales Warning and China Market Decline

During its recent earnings call, Chief Financial Officer Matt Friend projected that Nike's sales for the fiscal fourth quarter would fall between 2% and 4%, contrasting with Wall Street's forecast of a 1.9% increase. For the whole calendar year, the company expects a slight decline in sales driven by growth in North America but offset by a downturn in China, a figure below analysts' expectations.

While Nike surpassed analyst estimates in earnings and revenue for its third fiscal quarter, the guidance sparked concerns about the pace of its ongoing recovery. Friend noted that the company's forecast is based on the current global economic environment, which remains volatile due to geopolitical tensions and rising oil prices, factors that could influence costs and consumer spending.

Nike’s shares fell more than 8% after the earnings release.

For the quarter ending February 28, Nike reported earnings per share of 35 cents, exceeding the expected 28 cents. Revenue hit $11.28 billion, a modest increase over the $11.24 billion anticipated. However, net income declined 35% year-over-year to $520 million, reflecting a decrease in gross profit margin to 40.2%, primarily attributed to higher tariffs in North America.

Regionally, North America saw a 3% revenue growth to $5.03 billion, just below forecasts, while sales in Greater China fell 7% to $1.62 billion but still outperformed analyst expectations. The company’s efforts at transformation continue under CEO Elliott Hill, who acknowledges that rebuilding across Nike’s vast portfolio is a gradual process.

Hill emphasized that progress varies by market segment, with prioritized areas gaining momentum. He remains optimistic about the company’s future, saying teams are moving with focus and urgency to strengthen Nike's foundation despite ongoing challenges.

Friend added that the turnaround initiatives would keep impacting results throughout the year.

In Europe, the company’s shares fell 8.7% at the Frankfurt open on Wednesday.

Nike is facing headwinds from a global trade war and rising inflation, compounded by new geopolitical risks like the conflict in the Middle East, which has driven up energy costs and could pressure consumer spending on discretionary items such as apparel and footwear.

Despite concerns, Nike sees continued strength in North America with a robust summer order book and positive consumer trends, with no immediate impact observed from Middle East tensions on that market.

The company’s wholesale revenue increased 5% to $6.5 billion, while direct sales through stores and the website declined 4% to $4.5 billion, reflecting a shift in strategy under the CEO’s leadership.