Skip to content
    NKE
    Earnings call· Feb 2025(Q3 FY25)

    NIKE, Inc. NKE

    Mar 20, 2025 Source

    Executive summary

    NIKE, Inc. Q3 FY25 — Win Now Strategy Drives Product Diversification Amidst Marketplace Cleanup

    NIKE, Inc. is aggressively executing its 'Win Now' strategy, focusing on product portfolio diversification and marketplace cleanup. While the quarter saw revenue and gross margin headwinds from these actions, the company is seeing early momentum in performance categories and is repositioning its digital and wholesale channels for full-price selling. Management expects headwinds to moderate after Q4 FY25 as new innovations scale and the marketplace normalizes.

    Highlights

    5

    • Performance business grew in Q3 FY25, led by training and running, with running growing mid-single digits.

    • Demand creation expenses grew high single digits in Q3 FY25, reflecting elevated brand storytelling and impact.

    • North America wholesale revenue increased 3% in Q3 FY25 due to favorable shipment timing and increased shipments to value partners.

    • Vomero 5 revenue doubled and Nike Shox revenue grew over 10x in the last 3 quarters, indicating successful sportswear diversification.

    • Sales of the new 24/7 collection exceeded expectations, leading to ramped-up capacity.

    Concerns

    5

    • Revenues declined 9% on a reported basis and 7% currency-neutral in Q3 FY25.

    • Gross margins declined 330 basis points to 41.5% in Q3 FY25 due to higher markdowns, wholesale discounts, inventory obsolescence, product costs, and channel mix headwinds.

    • NIKE Direct revenue declined 10% (Digital down 15%, Stores down 2%) and Wholesale revenue declined 4% in Q3 FY25.

    • EBIT declined significantly across all geographies: North America -21%, EMEA -35%, Greater China -42%, and APLA -27%.

    • Classics Footwear franchises (Air Force 1, Dunk, Air Jordan 1) experienced double-digit declines and decelerated faster than the overall business, with inventory remaining elevated.

    Guidance & targets

    10
    CategoryTargetConfidence
    Q4 FY25 Revenue
    down in the mid-teens range, albeit at the low end
    high materiality
    High
    Q4 FY25 Gross Margins
    down approximately 400 to 500 basis points
    high materiality
    High
    Q4 FY25 SG&A dollars
    up low to mid-single digits
    medium materiality
    High
    Q4 FY25 Other Income and Expense
    $45 million to $55 million
    low materiality
    High
    Full-year FY25 Tax Rate
    mid-teens range
    medium materiality
    High
    Classics Footwear Franchises Contribution to Footwear Mix
    down by more than 10 points
    high materiality
    High
    Classics Footwear Franchises Units
    down double digits
    high materiality
    High
    Digital Traffic
    down double digits
    medium materiality
    High
    Marketplace Cleanup Actions
    continue
    high materiality
    High
    Wholesale Business Growth
    return to growth
    high materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    North America
    Revenue declined due to NIKE Direct performance, partially offset by wholesale growth from favorable shipment timing and increased shipments to value partners. EBIT declined significantly. Performance growth was led by training and running.
    NIKE Direct: down 10%NIKE Digital: down 12%Nike Stores: down 6%Wholesale: increased 3%Running growth: high single digits
    		down 4%-4%—EBIT declined 21%
    EMEA
    Revenue declined across channels, with a significant drop in NIKE Digital. EBIT declined substantially. Performance dimensions, particularly football (Mercurial) and running, continued to build momentum.
    NIKE Direct: down 12%NIKE Digital: down 25%Nike Stores: up 9%Wholesale: declined 3%
    		down 6%-6%—EBIT declined 35%
    Greater China
    Revenue and EBIT declined significantly due to a challenging macro environment, promotional market, and aggressive steps to clean up the marketplace. Traffic and retail sales underperformed. Strong consumer response to Peg Premium and Vomero 18 in running, and Kobe Protro in basketball.
    NIKE Direct: down 11%NIKE Digital: down 20%Nike Stores: down 6%Wholesale: declined 18%Traffic: declined double digitsRetail sales: underperformed plan
    		down 15%-15%—EBIT declined 42%
    APLA
    Revenue and EBIT declined, with mixed performance across territories. Japan and Latin America returned to growth. Energy was created in running communities, fueling momentum in footwear and apparel.
    NIKE Direct: down 4%NIKE Digital: down 8%Nike Stores: up 1%Wholesale: down 4%Japan and Latin America: returned to growth
    		down 4%-4%—EBIT declined 27%

    Operational metrics

    20
    Revenues
    down 9%YoY reported
    Q3 FY25

    Reflects headwinds from Win Now actions, with strong holiday results in December followed by double-digit declines in January and February.

    NIKE Direct Revenue Growth
    down 10%YoY
    Q3 FY25

    Comprises NIKE Digital and Nike Stores.

    NIKE Digital Revenue Growth
    down 15%YoY
    Q3 FY25

    Part of NIKE Direct.

    Nike Stores Revenue Growth
    down 2%YoY
    Q3 FY25

    Part of NIKE Direct.

    Wholesale Revenue Growth
    down 4%YoY
    Q3 FY25

    Largely due to declines in Greater China.

    Gross Margins
    41.5%declined 330 bps
    Q3 FY25

    Impacted by various factors including marketplace cleanup actions.

    SG&A
    down 8%YoY reported
    Q3 FY25

    Reflects tight expense management and accelerated investment in demand creation.

    Effective Tax Rate
    5.9%vs 16.5% prior year
    Q3 FY25

    Significantly lower than prior year due to a one-time tax benefit.

    Earnings Per Share
    $0.54
    Q3 FY25

    Reported EPS for the quarter.

    Demand Creation Expenses Growth
    high single digitsYoY
    Q3 FY25

    Increased investment to fuel Win Now priorities and elevate brand storytelling.

    Operating Overhead Growth (ex-restructuring)
    down 3%YoY
    Q3 FY25

    Reflects productivity efforts and variable expense reduction from direct channel.

    NIKE Digital Promotional Days
    0from over 30 last year
    Jan/Feb

    Significant reduction in promotional activity as part of repositioning NIKE Digital as a full-price business.

    NIKE Digital Demand at Full Price
    several percentage point improvement
    Jan/Feb

    Result of reduced promotional days and markdown rates.

    Performance Business Growth
    grew
    Q3 FY25

    Led by improving brand and business momentum in training and running.

    Running Performance Growth
    mid-single digits
    Q3 FY25

    A standout field of play for the quarter.

    Vomero 5 Revenue Growth
    doubled
    Q3 FY25

    Example of healthy diversification in sportswear footwear.

    Nike Shox Revenue Growth
    over 10x
    last 3 quarters

    Strong momentum in sportswear footwear.

    Vomero 18 Distribution Expansion
    doubled
    by mid-April

    Planned expansion supported by a large-scale running campaign.

    Greater China Traffic
    declined double digits
    Q3 FY25

    Reflects challenging macro environment and promotional market.

    Japan and Latin America Growth
    returned to growth
    Q3 FY25

    Positive performance within the APLA segment.

    Industry KPIs

    6
    MetricValueDetails
    Effective tax rate5.9%%
    Inventory positiondeclined 2%%
    Revenue by channel—
    Operating margin sg a41.5%%
    Tariff cost exposure recovery—
    Franchise product cycle performance—

    Product announcements

    6
    ProductTypeDetails
    Pegasus Premiumlaunch
    Vomero 18launch
    24/7 collectionlaunch
    NikeSKIMSlaunch
    Shai 1 (Converse)launch
    Air Max new innovation platformroadmap

    Deals & partnerships

    1
    SKIMSCollaboration to create a new brand and product line, NikeSKIMS.

    Partnership to launch NikeSKIMS, a new brand with a comprehensive collection of style-led performance apparel. The first collection will launch in North America through Nike and SKIMS direct channels next quarter and scale globally over multiple seasons.

    Risks & headwinds

    7
    Global economic uncertainty

    unquantified

    Mitigation: Focus on 'Win Now' strategic priorities to drive progress despite uncertainty.

    Continued headwinds from classic franchisesQ3 FY25, expected to continue into FY26

    double-digit declines

    Mitigation: Rightsizing inventory, accelerating actions to reduce supply, and planting newness in sportswear.

    Elevated inventory across all geographiesQ3 FY25, expected to continue through H1 FY26

    declined 2% vs prior year, but remains elevated

    Mitigation: Tightening buys for NIKE Digital, increasing markdowns in Nike Factory Stores, providing higher wholesale discounts, and sales-related returns to liquidate aged inventory.

    Increased customer cancellationsQ3 FY25

    some increases

    Mitigation: Not explicitly stated, but implied by marketplace cleanup actions.

    Challenging macro environment and promotional market in Greater ChinaQ3 FY25, ongoing

    traffic declined double digits, retail sales underperformed plan

    Mitigation: Aggressive steps to clean up the marketplace, focusing on brand distinction, new innovation, and hyperlocal product.

    External factors creating uncertaintyQ4 FY25 and beyond

    unquantified

    Mitigation: Focusing on controllable factors like product innovation and brand momentum. Q4 guidance includes assessment of these factors.

    Newly implemented tariffs on imports from China and MexicoQ4 FY25

    estimated impact included in Q4 gross margin guidance

    Mitigation: Impact is factored into financial guidance.

    What to watch in Q4 FY25

    5

    Q4 FY25 Revenue Performance

    next quarter
    Currentdown 7% currency-neutral in Q3 FY25
    Targetdown in the mid-teens range, albeit at the low end

    Why it matters

    This will indicate the peak impact of the 'Win Now' actions and the effectiveness of initial mitigation strategies on top-line performance.

    We expect Q4 revenues to be down in the mid-teens range, albeit at the low end.

    Q&A highlights

    6

    When do you expect classic shoe inventories to be clean in both wholesale and direct channels?

    Management stated they are accelerating actions to rightsize inventory of classic franchises (AF1, Dunk, AJ1), expecting their contribution to footwear mix to be down over 10 points by end of Q4 FY25 and units down double digits in FY26. Excess inventory from wholesale returns and tightened digital buys will be liquidated through Nike Factory Stores. Air Force 1 inventory is stabilizing, while AJ1 and Dunk remain elevated, with cleanup expected to take several quarters through H1 FY26.

    “We intend to drive this mix lower in fiscal '26, with total units planned down double digits with the most aggressive actions on the Dunk.”

    asked by Lorraine Maikis · answered by Matthew Friend

    2 min read5 chapters

    Detailed Narrative

    01

    Win Now Strategy and Priority Actions

    NIKE, Inc. is actively implementing its 'Win Now' strategic priorities, focusing on five key actions: igniting a winning culture, shaping the brand for distinction, accelerating a complete product portfolio, elevating and growing the marketplace, and winning on the ground. These actions are concentrated on five sports (running, basketball, football, training, sportswear), three key countries (United States, China, United Kingdom), and five key cities (New York, Los Angeles, London, Beijing, Shanghai) to drive focused investment and resource allocation.

    02

    Brand Shaping and Impact

    The company demonstrated its brand-shaping efforts through high-impact activations during the Super Bowl and NBA All-Star Weekend. This included significant product visibility, debut of new ad campaigns like 'So Win' and Jordan Brand's 'Love, Hurts', and pop-up retail spaces. These events aimed to connect with athletes, influencers, and partners, showcasing the power of Nike, Jordan, and Converse brands in performance and culture, resulting in record commercial days for flagship stores.

    03

    Product Portfolio Diversification

    Nike is driving a more diversified product portfolio, leading with performance and balancing seeding with scaling products. Running was a standout, growing mid-single digits, with successful launches like Peg 41, Pegasus Premium, and Vomero 18. In Sportswear, the strategy involves rightsizing classic franchises like Air Force 1, Dunk, and Air Jordan 1 while investing in newness such as Vomero 5, Nike Shox, Air Superfly, and Air Max innovations. Apparel diversification is also a focus, with new collections like 24/7 exceeding expectations.

    04

    Integrated Marketplace Repositioning

    Nike is actively repositioning its integrated marketplace to create consumer-led experiences across NIKE Direct and wholesale partners. This involves restoring sales organization and go-to-market processes, engaging earlier with wholesale partners, and delivering consumer-right assortments. NIKE Digital is being transformed into a full-price business by significantly reducing promotional days and discounting, with North America Digital having zero promotional days in January and February compared to over 30 last year.

    05

    Geographic Focus and China Cleanup

    The 'Win Now' strategy is being implemented across all geographies, with specific focus on the United States, China, and the United Kingdom. In Greater China, Nike is taking aggressive steps to clean up the promotional marketplace, which negatively impacted Q3 revenue and gross margin. Despite a challenging macro environment and double-digit traffic decline, the company remains committed to the long-term opportunity in China, focusing on brand distinction, new innovation, and hyperlocal products.

    AI-generated summary of the company’s earnings call. Not investment advice.