Nike Shares Slip After Disappointing Q3 Earnings Report

Nike shares fell 5.3% after a disappointing Q3 earnings report with a 9% revenue decline and EPS dropping from $0.77 to $0.54. The company faces challenges, including tariffs and an overstock problem, which continue to cloud investor confidence.

Date: 21-03-2025

AI Rating: 4

Earnings Per Share (EPS): Nike reported a decline in earnings per share, falling from $0.77 to $0.54, although this surpassed analysts' consensus estimate of $0.28. This indicates that while the decline is concerning, it somewhat alleviates extreme investor worry due to the better-than-expected earnings.

Revenue Growth: Revenue for the quarter decreased by 9% to $11.3 billion, despite beating the consensus estimate of $11.03 billion. This decline puts pressure on stock performance as it raises concerns regarding future growth potential.

Profit Margins: The gross margin fell by 330 basis points to 41.5%, a clear sign that Nike is clearing inventory through markdowns, which negatively impacts profitability. This contraction in profit margins is a red flag for investors.

Outlook: Nike management anticipates a revenue decline by a mid-single-digit percentage in the upcoming fourth quarter along with further gross margin contraction of 400 to 500 basis points. This outlook suggests continued struggles ahead, and the warning about tariffs further complicates a recovery narrative.

Despite these challenges, there were some positive signals, such as the growth in running and a 7% increase in North American apparel sales, which could indicate potential areas for recovery. Nonetheless, the overall sentiment remains cautious due to the ongoing contraction in various business segments.

Stocks: NKE