Nike's Q3 performance for fiscal year 2026:
Revenue was $11.279 billion, compared to $11.269 billion in the same period last fiscal year; net profit was $520 million, representing a 35% year-over-year decrease.
Review of the Q3 income statement:
Nike's revenue reached $11.3 billion, remaining flat on a reported basis but declining by 3% on a constant currency basis.
Nike brand revenue was $11 billion, growing by 1% on a reported basis but declining by 2% on a constant currency basis, mainly due to lower revenue in Europe, the Middle East, Africa, and Greater China, partially offset by growth in the North American market.
Wholesale revenue was $6.5 billion, increasing by 5% on a reported basis and by 1% on a constant currency basis, primarily driven by strong performance in the North American market.
Nike Direct revenue was $4.5 billion, decreasing by 4% on a reported basis and by 7% on a constant currency basis; Nike brand online revenue fell by 9%, while revenue from owned stores declined by 5%.
Converse brand revenue was $264 million, declining by 35% on a reported basis and by 37% on a constant currency basis, with revenue contraction across all regional markets. Gross margin dropped by 130 basis points to 40.2%, primarily due to increased tariffs in North America.
Selling and administrative expenses increased by 2% year-over-year to $4 billion. Demand creation expenses amounted to $1.1 billion, unchanged from the same period last year; higher sports marketing spending and unfavorable foreign exchange rate movements were offset by reductions in brand marketing costs.
Operating management expenses amounted to USD 2.9 billion, representing a year-on-year increase of 3%. Increased employee severance costs and negative impacts from foreign exchange rate fluctuations were partially offset by reductions in other administrative expenditures.
The effective tax rate for the period was 20.0%, compared to 5.9% in the same period last year. The primary reason was the recognition of a one-time non-cash deferred tax benefit in the prior year period pursuant to U.S. tax regulations related to foreign exchange gains and losses.
The company reported net profits of USD 500 million, reflecting a year-on-year decline of 35%; diluted earnings per share stood at USD 0.35, with a year-on-year decrease of 35%.
Balance Sheet Analysis:
Nike's inventory totaled USD 7.5 billion, marking a 1% year-on-year decrease. The reduction was primarily driven by decreased shipment volumes and changes in product mix, while rising tariffs in North America increased product costs, partially offsetting the inventory decline.
Cash and equivalents, along with short-term investments, totaled USD 8.1 billion, reflecting a sequential and year-on-year decrease of approximately USD 2.3 billion. Cash generated from operating activities was insufficient to cover cash outflows from dividend distributions, bond repayments, capital expenditures, and stock repurchases.
Shareholder Returns
Nike has an excellent track record of returning value to shareholders, including raising dividend payouts for 24 consecutive years. In the third quarter, the company returned approximately USD 609 million to shareholders through dividends, representing a 3% increase year-on-year.