Earnings Report Analysis | Converse Revenue Plummets, Nike Experiences Volatile Adjustment

Although there are signs of recovery, Nike still faces significant pressure in its new strategic process.

On April 1st, Nike Group announced its third-quarter financial report for fiscal year 2026. During the quarter, Nike’s revenue was $11.3 billion, flat compared to the same period last year based on the report, with a 3% decrease at fixed exchange rates; net profit for the quarter was $520 million, down 35% year-over-year, with a gross profit margin of 40.2%, down 130 basis points year-over-year. The company stated that this was mainly affected by rising tariffs in North America.

Matthew Friend, Vice President and Chief Financial Officer of Nike Group, said, “The performance in the third quarter met our expectations, and the team continues to execute steadily and in an orderly manner. The ‘Win Now’ initiative will continue to impact performance within this fiscal year, and we remain confident in the company’s long-term profitable growth.”

Before the end of 2024, Nike replaced its global CEO. To some extent, this was a rejection of the previous D2C strategy and the former CEO. The new CEO, Elliott Hill, reaffirmed that Nike is a sports brand, not a fashion or luxury product. This means Nike still regards “sports functionality” as its primary product attribute.

The group’s self-operated business revenue was $4.5 billion, down 4% based on the report; distributor business revenue was $6.5 billion, up 5%; inventory assets were $7.5 billion, a 1% decrease compared to the same period last year.

Regionally, North America became the main driver of this performance, with revenue increasing by 3%, including an 11% growth in wholesale business and a 5% decline in direct sales.

However, the Chinese market still faces certain challenges. In the third quarter, the group’s business in Greater China continued to decline, with revenue of $1.61B, down 10% year-over-year, but inventory units decreased by over 20% year-over-year.

In January this year, Nike announced personnel changes, with Dong Wei, head of Greater China, officially stepping down on March 31. Meanwhile, Nike appointed Cathy Sparks as the new Vice President and General Manager of Greater China. Nike believes that Sparks, with her extensive management experience in complex markets, will bring new perspectives for the Chinese market and further strengthen strategic execution and transformation implementation.

The reporter noted that Nike’s subsidiary Converse’s revenue in the third quarter was $264 million, down 35% year-over-year based on the report; after excluding exchange rate factors, it decreased 37%. All regional markets worldwide experienced declines. There were rumors earlier that Nike was seeking to sell Converse. However, Nike did not give a direct response.

Matthew Friend expects that, despite slight growth in North America, Nike’s revenue for the full year will decline by low single digits. Nike’s fourth fiscal quarter revenue is expected to decline by 2% to 4%, affected by volatility from rising oil prices and ongoing conflicts in the Middle East. It is also expected that sales in the Chinese market will drop by 20% this season.

Possibly due to this news, Nike’s stock price in the Frankfurt market opened lower, falling nearly 9%.

(This article is from First Financial)