NIKE Inc. (NKE Quick QuoteNKE - Free Report) reported third-quarter fiscal 2026 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. While revenues were flat on a year-over-year basis, earnings per share (EPS) declined.

The company’s EPS of 35 cents plunged 35% from the year-ago level but beat the Zacks Consensus Estimate of 29 cents.

Revenues of the Swoosh brand owner were flat year over year at $11.28 billion and surpassed the Zacks Consensus Estimate of $11.23 billion. On a currency-neutral basis, revenues were down 3% year over year.

Revenues at NIKE Direct were down 4% on a reported basis and 7% on a currency-neutral basis to $4.5 billion. The decline resulted from a 9% decrease in NIKE Brand Digital and a 5% drop in NIKE-owned stores. Wholesale revenues were $6.5 billion, up 5% on a reported basis and 1% on a currency-neutral basis due to growth in North America.

NIKE’s shares have declined 9.2% in the after-hours trading session yesterday. This Zacks Rank #3 (Hold) company’s shares have lost 16.5% in the past three months compared with the industry’s 18.5% decline.

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NKE’s Operating Segment Synopsis for Q3

Revenues for the NIKE Brand were $11 billion, up 1% on a reported basis and down 2% on a currency-neutral basis. The fall was mainly due to declines in Greater China and EMEA, offset by growth in North America. We estimated total NIKE Brand revenues to be flat year over year at $10.89 billion in the fiscal third quarter due to a 5.6% decline in Direct-to-Consumer, offset by a 4.4% rise in the Wholesale business.

Within the NIKE Brand, revenues in North America rose 3% year over year to $5.03 billion. Sales at NIKE Direct were down 5% in the region, including a 7% decrease at NIKE Digital and 1% drop at NIKE Stores. Performance was driven by strength in key performance categories, with Running and Global Football delivering double-digit growth and Basketball rising in the high-single digits, partly offset by a double-digit decline in Sportswear. The Digital business improved sequentially through the quarter, supported by strong product launches, sport-led demand and continued moderation in average retail discounts.

Wholesale sales rose 11% year over year on a reported basis in North America. Wholesale revenues benefited from distribution wins and easier comparisons following marketplace management actions with existing partners in the prior year, reinforcing a healthier channel mix and improving sell-through trends.

In EMEA, the company’s revenues inched up 2% year over year on a reported basis but fell 7% on a currency-neutral basis to $2.87 billion. Wholesale business revenues declined 4% year over year. NIKE Direct revenues for the segment declined 13%, with a 6% drop at NIKE Digital and a 20% decrease in NIKE Stores.

In Greater China, revenues plunged 7% year over year on a reported basis and 10% on a currency-neutral basis to $1.62 billion. NIKE Direct fell 5%. NIKE Digital revenues dropped 21% year over year and NIKE stores rose 1%. Wholesale revenues for the region tumbled 13% year over year.

In APLA, revenues rose 1% year over year on a reported basis and declined 2% on a currency-neutral basis to $1.49 billion. NIKE Direct declined 8% due to a 12% decline in NIKE Digital and a 3% dip in NIKE stores. Wholesale revenues were up 3% in the region.

Revenues at the Converse brand fell 35% on a reported basis and 37% on a currency-neutral basis to $264 million, driven by declines across all territories.

A Look at NIKE’s Costs & Margins

NIKE’s gross profit dipped 3% year over year to $4.53 billion, while the gross margin contracted 130 basis points (bps) to 40.2%. The gross margin decline was driven by a 300-bps cost increase related to higher tariffs in North America. We anticipated the gross margin to decline 180 bps to 39.7%.

Selling and administrative expenses increased 2% to $3.98 billion, driven by employee severance charges incurred in the quarter. As a percentage of sales, SG&A expenses rose 80 bps year over year to 35.3%. Demand creation expenses were flat year over year at $1.09 billion. Operating overhead expenses increased 3% year over year to $2.89 billion.

Our model predicted selling and administrative expenses of $3.94 billion, indicating a year-over-year rise of 1.4%. Our model predicted demand creation expenses of $1.16 billion, suggesting a year-over-year increase of 7%. Operating overhead expenses were anticipated to decline 0.7% year over year to $2.79 billion.

NKE’s Balance Sheet & Shareholder-Friendly Moves

NIKE ended third-quarter fiscal 2026 with cash and cash equivalents of $6.66 billion, down nearly 23% year over year. Short-term investments totaled $1.4 billion, down 22% year over year. As of Feb. 28, 2026, the company had a long-term debt (excluding current maturities) of $7.03 billion and shareholders’ equity of $14.09 billion.

As of Feb. 28, inventories totaled $7.5 billion, down 1% year over year. In the fiscal third quarter, the company returned $609 million to shareholders through dividends.

NKE’s Outlook

Management acknowledged that the turnaround is progressing more slowly than initially expected, but emphasized that a clear roadmap is in place, with “Win Now” actions targeted for completion by the end of the calendar year. In the next nine months, the company anticipates continued puts and takes across both revenues and the gross margin as initiatives are implemented and channel dynamics evolve. Despite near-term variability, confidence in the trajectory remains firm.

For fiscal 2026, management expects revenue to decline in the low-single digits year over year, with gains in North America offset by weakness in Greater China, reflecting intentional reductions in sell-in and continued marketplace management actions.

Assuming no significant shifts in the tariff environment, the company expects the first quarter of fiscal 2027 to mark the final period of meaningful year-over-year tariff pressure on the gross margin. Margin expansion is projected to begin in the fiscal second quarter, supported by tariff mitigation efforts and the recovery of temporary impacts tied to “Win Now” initiatives. Earnings are anticipated to remain roughly flat in the near term, as improving gross margin and disciplined SG&A expense management lay the groundwork for a broader recovery.

Management also cautioned that the operating backdrop remains dynamic, with potential volatility stemming from Middle East disruptions, rising oil prices and other macro factors that could influence input costs and consumer demand. 

For fourth-quarter fiscal 2026, revenues are expected to decline 2-4%, with modest growth in North America despite tough comparisons from prior-year value liquidation, largely offset by weakness in Greater China and Converse. Greater China revenues are projected to fall roughly 20%, reflecting reduced sell-in and accelerated marketplace cleanup, while foreign exchange is expected to provide a two-point benefit.

The gross margin is expected to improve sequentially, declining about 25-75 bps in the fiscal fourth quarter, including a roughly 250-bps headwind from higher North America tariffs. SG&A dollars are projected to be flat to slightly lower, while other expenses, net of interest income, are expected to be $15-$25 million. The company anticipates the fiscal 2026 tax rate in the low-20% range.

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