Nike shares tumbled more than 15 per cent on Wednesday after the sportswear giant warned its recovery would take longer than expected.
Investors had been looking for signs that Nike’s turnaround was gaining traction when the retailer reported its fiscal third-quarter results on Tuesday night. Instead, the company cautioned that sales would continue to decline through the end of the year.
Finance chief Matt Friend told analysts that revenue is expected to fall by a low single-digit percentage over the coming quarters, with growing strength in North America offset by a sharp downturn in China.
Nike expects sales to decline by between two per cent and four per cent in the current quarter, missing analyst expectations for 1.9 per cent growth. It also warned that sales in China are set to plunge by around 20 per cent, even after a two percentage point benefit from foreign exchange rates.
The retailer said efforts to clean up its assortment in China and push more full-price sales would continue to weigh on revenue through fiscal 2027.
The gloomy outlook sparked a sharp market reaction, with Goldman Sachs, JPMorgan and Bank of America all moving to downgrade the stock on Wednesday as patience with the group’s recovery story appeared to wear thin.
Bank of America analyst Lorraine Hutchinson said management had previously suggested improved product innovation and easier comparisons would support a return to growth in the first quarter of fiscal 2027, but guidance now indicated sales would remain negative into the third quarter.
Nike’s struggles are not confined to China. In its Europe, Middle East and Africa region, revenues fell seven per cent in the third quarter, driven largely by weakness in sportswear and what the company described as a highly promotional retail environment.
Friend said the EMEA region showed both progress and challenges during the period, with performance categories such as running delivering double-digit growth, but sportswear falling sharply as sell-through failed to match sell-in expectations.
Promotional activity across the market also intensified, while Nike said it had been more aggressive with markdowns on its digital channels at the end of the season, contributing to a higher off-price mix. Inventory in the region rose by double digits year on year.
Chief executive Elliott Hill said Nike’s city-led approach to launching new products would become increasingly important in EMEA, where the business lacks a fully integrated marketplace.
“It has been one of our biggest hurdles,” he said, adding that Nike would work more closely with wholesale partners to improve point-of-sale storytelling and community presence.
The comments came after the company made changes to its EMEA leadership earlier this year, appointing César Garcia as vice president and general manager of the region.
Across the wider business, Nike reported third-quarter net income of $520m (£379m), down 35 per cent from $794m (£579m) a year earlier. Diluted earnings per share fell from 54 cents to 35 cents.
Net sales came in at $11.3bn (£8.2bn), flat on a reported basis and down three per cent on a currency-neutral basis.
Nike also warned that gross margin recovery could remain elusive. Margins have now declined year on year for seven consecutive quarters, and Friend said rising oil prices and disruption linked to conflict in the Middle East could further increase input costs and affect consumer behaviour.
“The environment around us has become increasingly dynamic, and we could experience unplanned volatility due to the disruption in the Middle East, rising oil prices, and other factors that could impact either input costs or consumer behavior,” he said.
Hill insisted the business was moving in the right direction, but acknowledged the work was taking longer than hoped.
“This is complex work, and parts of it are taking longer than I’d like, but the direction is clear,” he said. “The urgency is real, and the foundation is getting stronger.”
Nike said it would return to providing full-year and long-term guidance at its next investor day in the autumn.
