Nike Shares Down On Weak Q3 Profit, Cautious Q4 Outlook

Core Viewpoint - Nike, Inc. is experiencing a significant decline in share price due to warnings of weak revenues in the fourth quarter and a notable drop in profit for the third quarter, attributed to higher tariffs and increased expenses impacting margins [1][4]. Financial Performance - In the third quarter, Nike reported a net income of $520 million, or $0.35 per share, which is a 35% decrease from $794 million, or $0.54 per share, in the previous year [4]. - The company's revenue for the third quarter slightly increased by 0.1% to $11.279 billion from $11.269 billion year-over-year, but fell by 3% on a currency-neutral basis [5]. - Pre-tax income decreased by 23% year-over-year to $650 million, with selling and administrative expenses rising by 2% to $3.98 billion [4]. Revenue Breakdown - Nike Brand revenues reached $11.0 billion, growing by 1% on a reported basis but declining by 2% on a currency-neutral basis, primarily due to decreases in EMEA and Greater China, offset by growth in North America [6]. - Wholesale revenues were $6.5 billion, up 5% on a reported basis and up 1% on a currency-neutral basis, mainly driven by growth in North America [6]. - NIKE Direct revenues fell to $4.5 billion, down 4% on a reported basis and 7% on a currency-neutral basis, influenced by a 9% decrease in NIKE Brand Digital and a 5% decrease in NIKE-owned stores [7]. Margin and Tariff Impact - Gross margin decreased by 130 basis points to 40.2% from 41.5% a year ago, primarily due to a 300 basis point impact from higher tariffs in North America [5]. - The company anticipates that the first quarter of fiscal 2027 will be the last quarter where higher tariffs significantly affect gross margin, with expectations for gross margin expansion beginning in the second quarter [3]. Inventory and Future Guidance - Nike's inventories decreased by 1% year-over-year to $7.5 billion, reflecting a reduction in units and product mix shifts, partially offset by increased product costs due to higher tariffs [8]. - The company plans to provide full-year and long-term guidance at its upcoming Investor Day in the fall [8].