NIKE (NYSE:NKE) executives told investors on the company’s fiscal third-quarter 2026 earnings call that the brand’s “comeback” is progressing, but will continue to create near-term pressure as the company works through inventory, promotional activity and structural cost actions.
President and CEO Elliott Hill said Nike has been executing a deliberate set of “win now” actions across “brands, sports, geographies, and channels,” noting that some parts of the portfolio are improving faster than others. A key step in the quarter, Hill said, was further removing “unhealthy inventory” of classic footwear franchises from the marketplace, which created “roughly a five-point headwind” to reported results. “It was intentional, it was necessary,” Hill said, adding that the actions are aimed at improving marketplace health, revenue quality and the foundation for more sustainable growth.
Q3 results: revenue down 3% currency-neutral; tariffs and severance weighed on margins
Gross margin fell 130 basis points to 40.2%, which Friend said was “primarily due to 300 basis points associated with higher tariffs in North America.” SG&A increased 2% on a reported basis due to employee severance charges, partially offset by “other income from legal settlements.” Effective tax rate was 20% and earnings per share were $0.35.
Inventory declined 1% versus the prior year, with units down mid-single digits, Friend said.
Friend also detailed a $230 million charge for employee-related severance costs, primarily in supply chain and technology, with some associated with “right-sized operating costs at Converse.” He said the company is “reset[ting] our cost base” following pandemic-era investments that supported a larger digital/direct business but increased fixed costs as revenue later declined. Friend said the actions should help lower costs, streamline operations and reduce capacity in distribution over time, shifting the supply chain toward a more variable cost structure. Benefits are expected to begin in fiscal 2027 and build through fiscal 2028, and while additional supply-chain actions could create future impacts, Friend said Nike believes this quarter’s actions “will represent the largest financial impact.”
Operational focus: sport offense, marketplace reset, and innovation
Hill described the company’s emphasis on a “sports offensive,” particularly running and global football, and on rebalancing from a “Nike Direct first offense” toward a more integrated marketplace with wholesale partners.
Hill said Nike Running is “up over 20% for the quarter,” calling it an early proof point of the sport offense approach. He also outlined initiatives ahead of the 2026 World Cup, including a football footwear construct with Tiempo launched in Q3 and a new Mercurial expected to be unveiled in June, as well as Aero-FIT kits for competing Nike federations. Hill said Nike plans to elevate football presentation in “more than 5,000 football doors around the world” by the end of the tournament.
On innovation, Hill highlighted Nike’s “new Nike Mind platform,” which he said has “over 150 patents filed globally” and sold out in all geographies. He said Nike plans to double production over the next two seasons after more than 2 million consumers signed up for “Notify Me” on nike.com. Hill also cited additional early-stage platforms introduced in the quarter, including Nike Air used as a self-inflated thermal layer in apparel, a “liquid Air Max” platform, and Aero-FIT—an elite cooling platform he said increases airflow by 200% over regular Dri-FIT and is expected to expand to multiple sports.
Regional performance: North America leads; EMEA faces promotions; Greater China managed down
In North America, Friend said revenue grew 3% in Q3, with wholesale up 11% and Nike Direct down 5%. Nike Digital declined 7% and Nike stores were down 1%. North America EBIT declined 11% on a reported basis. Friend said running and global football posted double-digit growth, basketball was up high single digits, and sportswear declined double digits.
Friend said North America digital improved sequentially through the quarter, supported by sport launches and improved average retail discounts. He added that Nike saw “positive growth in all channels in the geography for the first time in two years.” While North America gross margin declined 360 basis points year over year, Friend said that included “nearly 650 basis points of gross impact from new U.S. tariffs,” and that “underlying profitability has now improved over three consecutive quarters.”
In EMEA, Q3 revenue declined 7%, with Nike Direct down 13% (Nike Digital down 6% and Nike stores down 20%) and wholesale down 4%. Despite the sales decline, EMEA EBIT increased 7% on a reported basis. Friend said the region showed performance momentum led by double-digit running growth, but sportswear declined double digits and sell-through did not match sell-in expectations in a “highly promotional marketplace.” He said promotions increased as partners managed inventory, and Nike was “more aggressive with promotions on Nike Digital at the end of the season,” increasing markdowns and off-price mix. Inventory rose double digits, with units up mid-single digits, and Nike anticipates ending Q4 with elevated inventory due to sportswear softness, traffic and promotions across Europe, and “recent disruption in the Middle East.”
Hill also noted leadership changes in EMEA, expressing confidence in new regional leader César García, described as a 25-year Nike veteran.
In Greater China, Q3 revenue declined 10%, with Nike Direct down 5% (Nike Digital down 21% and Nike stores up 1%) and wholesale down 13%. EBIT increased 11% on a reported basis. Friend said running grew double digits and tennis, golf and ACG grew, while sportswear declined double digits “as expected.” He said wholesale sell-in was “managed down” while seasonal sell-through improved sequentially. Nike expanded a store pilot to 100 doors, including its House of Innovation in Shanghai, and adjusted digital tactics by pulling key styles off discount to improve full-price realization. Inventory was down mid-teens, with units down more than 20%, and partner inventory also declined double digits. Friend said Nike expects continued reduced sell-in and marketplace cleanup actions in fiscal 2027, which will remain a headwind to revenue, while “profitability should bottom sooner.”
In APLA, Q3 revenue declined 2%, Nike Direct fell 8%, and wholesale increased 3%. Friend said running grew double digits, training and football grew, and sportswear declined double digits. Inventory rose high single digits, while units fell low single digits; closeout mix remained elevated, and Nike plans to address excess inventory over the coming quarter.
Sportswear and classics: stabilization signs, but work remains
Both Hill and Friend underscored that sportswear remains a headwind. Friend said sportswear declined “low double digits” in the quarter and continues to weigh on revenue growth, while the marketplace remains promotional and markdowns “remain elevated,” pressuring gross margin.
Asked about stabilizing the sportswear business, Hill said Nike is shifting “from defense to offense” in Nike Sportswear and Jordan Streetwear after intentionally pulling back classic footwear supply. He said Air Force 1 and Air Jordan 1 “stabilized this quarter,” with “month-to-month improvement in full price realization” for both. Hill said Nike is “still stabilizing the Dunks” and cited strong sell-through and high full-price realization for launches including AJ11 Gamma, AJ5 Wolf Grey and the Air Max 95.
Outlook: Q4 revenue down 2%-4%; margins expected to inflect in fiscal 2027 Q2
Friend said Nike expects to complete its win now actions by the end of the calendar year and provided additional visibility for the coming nine months. Over that period, Nike expects revenues to be down low single digits versus the prior year, with gains in North America offset by declines in Greater China driven by intentionally reduced sell-in and marketplace management actions.
On tariffs, Friend said that, assuming no significant changes, fiscal 2027’s first quarter is expected to be “the final quarter where higher tariffs continue to be a material year-over-year headwind to gross margin,” with gross margin expansion expected to begin in the second quarter due to tariff mitigation actions and recovery of transitory win-now impacts.
For the fourth quarter of fiscal 2026, Friend guided to:
- Revenue: down 2% to 4%, with modest growth in North America largely offset by declines in Greater China and Converse; approximately a two-point benefit from foreign exchange
- Greater China revenue: down approximately 20% in Q4, reflecting reduced sell-in and accelerated marketplace cleanup
- Gross margin: sequential improvement, with Q4 down approximately 25 to 75 basis points, including 250 basis points due to higher tariffs in North America
- SG&A dollars: flat to down slightly
- Other expense: $15 million to $25 million
- Full-year tax rate: low-20% range
Friend added that the company plans to return to providing full-year and long-term guidance at an Investor Day this fall at the Philip H. Knight Campus in Beaverton, where Hill said Nike will share a more detailed long-term view of the business.
About NIKE (NYSE:NKE)
Nike, Inc (NYSE: NKE) is a global designer, marketer and distributor of athletic footwear, apparel, equipment and accessories. Founded in 1964 as Blue Ribbon Sports by Phil Knight and Bill Bowerman and renamed Nike in 1971, the company is headquartered near Beaverton, Oregon. Nike develops and commercializes products across performance and lifestyle categories for sports including running, basketball, soccer and training, and is known for signature technologies and design-driven product lines.
The company markets products under several primary brands, including Nike, Jordan and Converse, and sells through a combination of wholesale relationships, branded retail stores and direct-to-consumer channels such as company-operated stores and digital platforms (e.g., Nike.com and mobile apps).
