Nike Inc. signage on the floor of the New York Stock Exchange, December 31, 2025.
Michael Nagle | Bloomberg | Getty Images
When Nike After releasing its third-quarter financial results late Tuesday, investors were looking for evidence that its recovery was on the right track.
Instead, all they learned was that the retailer’s turnaround is far from over, sending shares tumbling more than 14% as of midday Wednesday.
On a call with analysts, Chief Financial Officer Matt Friend warned that sales would decline by a low single-digit percentage through the end of this calendar year, as declines in China were expected to offset growing strength in North America.
The company forecasts its sales will fall between 2% and 4% in the current quarter, worse than the 1.9% growth forecast by analysts, while it expects sales in China to plunge 20% – even with a two-point benefit from foreign exchange rates. Efforts to clean up Nike’s assortment in China and drive full-price sales are expected to continue — and remain a drag on revenue growth — through fiscal 2027, which is expected to end next spring.
It plans to start making up for the period in which it began to be hit by higher tariffs in the first quarter of fiscal 2027, scheduled for this summer, which could allow it to more easily compare profits year-over-year. Executives expect that gross margins could start to increase by the end of the year, during the retailer’s second quarter of fiscal 2027, if at all.
Nike’s gross margin has declined year over year for seven straight quarters, and it may be more difficult to increase that number now as product input costs may rise due to the war in the Middle East.
“The environment around us has become increasingly dynamic and we could experience unanticipated volatility due to disruptions in the Middle East, rising oil prices and other factors that could impact input costs or consumer behavior,” Friend said. “We focus on what we can control, and these assumptions reflect the macroeconomic environment as it exists today.”
The delay in the turnaround, continued bad news and the number of business lines that Nike must repair to stabilize the entire company have left investors sour. The few pieces of good news – better-than-expected sales in China, growth in wholesale revenues, continued growth in North America – were not enough to boost the stock.
On Wednesday morning, three of the largest banks on Wall Street, Goldman Sachs, J.P. Morgan And Bank of Americaall downgraded the stock, citing the slow recovery, growing headwinds and dwindling patience.
“We believed that improved product innovation performance and adoption of Win Now stocks would lead to a return to growth in 1Q27; instead, management set a forecast that sales would remain negative in 3Q27,” Bank of America analyst Lorraine Hutchinson said in a note to clients Wednesday. “Good results in running and North America have been the reasons for our patience, but with sales inflection in nine months, we see little room for multiple expansion, leading to our demotion.”
Throughout Nike’s call with analysts Tuesday, Friend and CEO Elliott Hill kept predicting a return to sustained growth, but again remained vague on the timeline.
“We are increasingly confident that we are on track to return to balanced growth in North America, both in the NIKE Direct and wholesale channels, in the near term,” Friend said.
In his speech, Hill reiterated that recovery is taking longer than expected.
“This is complex work, and some parts are taking longer than I would like, but the direction is clear,” Hill said. “The emergency is real and the foundations are strengthening.”