Nike (NKE) shares plunged in pre-market trading on Wall Street despite a Q3 earnings ‘beat’ from the sneakers-to-soccer balls brand.
The catalyst was a downbeat Q4 revenue outlook provided by Nike.
| Nike | Share price: $47.2 (-10.7%) |
| Market cap: $78.2bn | PE: 30.1x |
This heightened concerns that the conflict in Iran could halt the sportswear titan’s turnaround progress under CEO Elliott Hill.
Q3 beat
Oregon-based Nike delivered Q3 adjusted earnings per share of $0.35, above the $0.31 Wall Street was looking for. Revenue of $11.3 billion was flat year-on-year but higher than the $11.34 billion analysts expected.
While performance in China improved, sales were still down 7% for the quarter. Another problem area for Nike is the Converse brand, where sales plunged 35% to $264 million amid declines across all territories.
Encouragingly, the namesake Nike brand grew sales 1% to $11 billion, surpassing expectations for a 0.5% increase.
Elevated inventories
Sales for Nike’s Q4, which began in March, are expected to decline between 2% and 4% according to CFO Matthew Friend.
In a call with analysts, Friend added that Nike sees elevated inventories in the region that includes Europe and the Middle East due to weakness and disruption from the Middle East war.
Progress on home turf
Worries over EMEA weakness overshadowed robust results in North America, where Q3 revenue ticked up 3% to over $5 billion. ‘This quarter we took meaningful actions to improve the health and quality of our business,’ said Hill.
‘The pace of progress is different across the portfolio and the areas we prioritised first continue to drive momentum.’
Hill added: ‘The work is not finished, but the direction is clear, our teams are moving with focus and urgency, and our foundation is getting even stronger to build the future of Nike.’
Nike shares are flashing red over one and five years and might interest risk-tolerant investors.
While the US company faces hot competition from Adidas (ADS), New Balance, On and Hoka, it is only in the middle innings of a turnaround.
Hill is working to get Nike’s core business back on track with a push into sports such as basketball and running.
And keep in mind, the company has a formidable long-run dividend track record. Nike has increased payouts to shareholders for 24 consecutive years.
Read the press release here: https://investors.nike.com/investors/news-events-and-reports/investor-news/investor-news-details/2026/NIKE-Inc–Reports-Fiscal-2026-Third-Quarter-Results/default.aspx
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