Nike Shares Plummet to New Low as Outlook Dims

Nike's profit beat is overshadowed by a sharp sales forecast cut and margin pressure from tariffs. Shares hit a 52-week low as China sales fall and Converse struggles.

Nike's latest quarterly earnings report presented a stark contrast between immediate performance and future expectations. While the athletic apparel giant surpassed analyst profit estimates for its third fiscal quarter, a sharp downward revision to its sales forecast sent investors into a sell-off. The move underscores the significant challenges the company faces, including rising import tariffs and persistent weakness in its crucial China market.

Profitability Under Pressure from Costs and Tariffs

A closer look at the financials reveals the core issue: eroding profitability. Despite a slight reduction in inventory to $7.5 billion, the benefits were immediately offset by higher product costs. The company's gross margin contracted to 40.2%. Management specifically pointed to increased import duties in North America as a major headwind, significantly pressuring results even as consumer demand in the region remained stable. Consequently, net income plummeted 35% to $520 million.

The regional performance data paints a picture of a deeply divided business:
* North America: Revenue grew 3%, supported by expansion in the wholesale segment.
* Greater China: Sales fell 10%, driven by aggressive local competition and continued consumer caution.
* Converse: Revenue for the brand crashed 35% to $264 million, pushing it into an operating loss.
* Direct-to-Consumer: Nike Direct sales declined by a currency-neutral 7%.

Revised Guidance Triggers Analyst Downgrades

This mixed performance is directly reflected in Nike's new, cautious outlook. For the fourth quarter, the company now anticipates a revenue decline of 2% to 4%, a stark reversal from its previous expectation of growth. Market experts responded swiftly, cutting their price targets. JPMorgan lowered its valuation to $52, while DA Davidson slashed its target to $46.

The revised forecast triggered a dramatic sell-off on the stock market. Shares tumbled to a new 52-week low of €38.31, marking a loss of approximately 29% since the start of the year. In response, CEO Elliott Hill emphasized that substantial corrective actions are underway to restore the company's health. However, management cautioned that a meaningful expansion of margins is not expected until the second quarter of fiscal 2027 at the earliest, citing persistent logistics and tariff-related expenses.