Nike is anticipated to reveal disappointing quarterly results on Thursday, following its warning to investors that the most challenging period of its turnaround could be in its fiscal fourth quarter.
Since delivering that cautionary note in March, conditions have further declined for the sportswear giant, prompting some investors to question whether sales and profits are poised for an even steeper downturn.
During that earlier warning, Nike was dealing with a 20% tariff on imports from China, a rate that President Donald Trump has since increased to 30%. Additionally, the launch of its collaboration with Kim Kardashian’s Skims intimates line was initially set for this quarter but has been pushed back to later in the year, as reported by Finance Newso.
To facilitate its recovery, Nike has been utilizing discounts and clearance channels to sell off excess inventory from its retro collections. However, according to a recent research note from Evercore, these measures have proven to be more challenging than anticipated, suggesting that profit margins could still face pressure before stabilizing.
The situation in the crucial Chinese market has also worsened since March, further dampening investor sentiment, Evercore noted.
Amid the challenges, there are emerging indicators that some of Nike’s innovative product launches are resonating with consumers. The bank reports that recent price increases across Nike’s offerings may help counterbalance the elevated costs stemming from tariffs—provided that these price hikes do not alienate customers.
Consumer sentiment has shown a rebound compared to the previous quarter, and Nike may have experienced a boost in sales during April when many shoppers made purchases in anticipation of rising prices due to tariffs. However, this growth was short-lived as U.S. retail sales fell more than expected in May.
Analysts have compiled the following expectations for Nike’s fiscal fourth quarter, based on consensus estimates from LSEG:
- Earnings per share: 13 cents per share
- Revenue: $10.72 billion
Since Elliott Hill assumed the role of Nike CEO in October, he has prioritized re-establishing relationships with wholesale partners after former Chief Executive John Donahoe’s direct sales approach led to a decline in both sales and profits.
The company anticipates a dip in sales through its direct channels, including its website and stores, as it reallocates inventory back to wholesalers. While foot traffic at Nike locations has been down since Hill’s leadership began, an uptick was noted in May, according to Placer.ai, a firm that analyzes visit data derived from mobile devices.
Visits to Nike stores declined by 10.2% in April year-over-year, but this drop improved to 3.2% in May, as per Placer.ai.
Investors are particularly focused on Nike’s forward guidance as the company prepares for its earnings call at 5 p.m. ET. Wall Street is also keen to hear any updates regarding the turnaround timeline, the product launch schedule, and potential budget cuts.
Plans for the Skims partnership are set to be a significant talking point as well. Alongside inventory clearance and innovative style rollouts, Nike aims to capture a larger share of the female customer demographic, which currently represents approximately 40% of its business.
This gender disparity is concerning for discretionary retailers, as women typically spend more on clothing than men. Nike has lost market traction to competitors in the athletic apparel space, such as Lululemon and Alo Yoga, which appeal more toward female consumers.
While sneakers remain a vital component of Nike’s business, apparel represents a growing sector, accounting for around 28% of the brand’s revenue in fiscal 2024.
