Overview of NIKE’s Financial Performance

NIKE, Inc. is the largest seller of athletic footwear and apparel in the world, operating through two main distribution channels - NIKE Direct (NIKE-owned retail stores and digital platforms) and wholesale accounts. The company’s strategy is to achieve sustainable, profitable long-term revenue growth by leading with sport, creating innovative products, building deep consumer connections, and delivering compelling consumer experiences.

NIKE’s results for the third quarter of fiscal 2025 reflected a decrease in traffic across NIKE Direct and actions taken to reduce supply of certain footwear products in the marketplace. This led to a 9% decrease in revenues compared to the prior year quarter, with NIKE Direct revenues down 12% and NIKE Brand wholesale revenues down 7%. Gross margin also decreased 330 basis points to 41.5% due to lower average selling prices, higher inventory obsolescence reserves, and increased product costs.

For the first nine months of fiscal 2025, NIKE’s revenues decreased 9% on a reported basis and 8% on a currency-neutral basis. NIKE Brand revenues, which represent over 90% of total revenues, were down 9% on a reported basis and 8% on a currency-neutral basis. Footwear revenues decreased 10% on a currency-neutral basis, while apparel revenues decreased 4%. NIKE Direct revenues were down 12%, primarily due to a 19% decline in NIKE Brand Digital sales and a 2% decline in comparable store sales.

Revenue and Profit Trends

NIKE’s revenues have declined in both the third quarter and first nine months of fiscal 2025 compared to the prior year periods. This was driven by lower revenues across all geographic operating segments, with the largest decreases in Greater China (-15% in Q3, -10% YTD), EMEA (-6% in Q3, -10% YTD), and North America (-4% in Q3, -8% YTD).

The Jordan Brand, Men’s, and Kids’ categories were the largest contributors to the revenue declines. NIKE Brand wholesale revenues decreased 7% in Q3 and 6% YTD, while NIKE Direct revenues were down 12% in both Q3 and YTD, reflecting lower digital and comparable store sales.

Profitability has also been impacted, with gross margin contracting 330 basis points in Q3 and 100 basis points YTD. This was primarily due to lower average selling prices, higher inventory obsolescence reserves, and increased product costs, partially offset by lower warehousing/logistics costs and the absence of prior year restructuring charges.

Operating overhead expense decreased 13% in Q3 and 9% YTD, driven by lower wage-related expenses and the prior year restructuring charges. However, demand creation expense increased 8% in both Q3 and YTD as NIKE invested more in brand marketing and sports marketing to support key product launches and sports moments.

As a result of the revenue declines and gross margin contraction, NIKE’s earnings before interest and taxes (EBIT) decreased 39% in Q3 and 28% YTD. The EBIT margin was 7.3% in Q3 and 9.9% YTD, compared to 10.9% and 12.6% in the respective prior year periods.

Strengths and Weaknesses

Strengths:

• Market leadership position in athletic footwear and apparel
• Strong brand equity and emotional connection with consumers
• Diversified global presence across multiple geographies and channels
• Innovative product pipeline and focus on creating “must-have” products
• Robust digital capabilities and growing NIKE Direct business

Weaknesses:

• Reliance on wholesale channel, which has been impacted by inventory management actions
• Declining revenues and profitability in key markets like Greater China and EMEA
• Gross margin pressure from lower average selling prices and higher costs
• Increased investment in demand creation expenses to drive brand momentum

NIKE’s position as the global leader in athletic footwear and apparel is a key strength, allowing it to leverage its brand equity and innovation capabilities to drive consumer demand. However, the company has faced challenges in recent periods, including declining revenues and profitability across multiple geographies and channels.

The shift towards NIKE Direct, particularly NIKE Brand Digital, is a positive long-term strategy, but the company has had to navigate the impacts of reduced wholesale demand and higher promotional activity. Gross margins have also been pressured, requiring NIKE to increase investment in demand creation to support its brand and product pipeline.

Outlook and Future Prospects

Over the next several quarters, NIKE expects its actions to reduce supply of certain footwear products, reposition NIKE Brand Digital as a full-price platform, and reinvest in wholesale distribution will have a negative impact on revenues and gross margin. The company also anticipates higher demand creation expense as it increases investment in brand marketing and sports marketing.

However, NIKE believes these actions are necessary to reignite brand momentum and reposition the business for long-term shareholder value creation. The company remains focused on building a complete product portfolio, creating emotionally-engaging consumer experiences, and elevating the entire marketplace.

Key factors that could impact NIKE’s future performance include:

• Ability to successfully execute its product, marketplace, and brand management strategies
• Continued consumer demand for athletic footwear and apparel
• Macroeconomic conditions, geopolitical dynamics, and foreign exchange rate fluctuations
• Competition from other major athletic brands and changing consumer preferences

Overall, NIKE is taking proactive steps to address near-term challenges, but the company’s long-term growth prospects remain tied to its ability to innovate, connect with consumers, and navigate an evolving global marketplace. Investors will be closely watching NIKE’s progress in restoring brand momentum and profitability in the quarters ahead.