Nike 3Q26 Immediate Call Postmortem
End of day they beat on revenue because of depressed expectations in China and APLA but missed in critical North America and EMEA regions that were supposed to be leading indicators of the turnaround. The total revenue guide for a 2%-4% decline in 4Q26 just extends the timeline for this story. Clearly upside to China this quarter only delayed the inevitable decline (~20%) that they now expect to occur in 4Q26.
“Progress will not happen all at once because of the scale and breadth of the Nike portfolio.” Feels like that kind of comment was much more appropriate a year ago than right now. “This is complex work and parts of it are taking longer than I would like” – tone we didn’t hear as explicitly a year ago.
We get an investor day this year! There is an old saying for retail investors – the best two times to sell a stock are 1) after investor days and 2) when a new headquarters is opened. Good news is they will reintroduce full year guidance at that event. Bad news is it means they won’t do it with 4Q26 earnings.
Very interesting they are doing a Jordan away kit for Brazil (World Cup). Not sure I was aware of that but it seems to add a bit of brand confusion. Reminds me of the days when Adidas decided to make Reebok an American football brand rather than the basketball brand it was well known for (because they wanted Adidas to be the brand in basketball even though nobody thought of it that way).
Really want to hear more about Nike Mind. It’s like the only new platform they ever talk about now. Apparently two million people signed up to learn more about it. Wonder what that looks like relative to anything else they have ever done because Nike has a massive CRM. In a similar manner, Elliott seems happy the company spent a lot of money “showcasing the ACG logo” but where is the color about actual sales of product? Why can't the sell-side ever ask questions about this stuff?
You got to be kidding me – digital is still too promotional. Hard to not have progress relative to last years ridiculously depressed levels but when will they clear this problem that’s been going on for year now? Keep in mind that Nike digital promotions make it harder for their wholesale partners to sell things at full price.
Interesting the company wants the supply chain to be variable cost going forward as opposed to fixed cost when consensus is the company is currently sitting at depressed revenue levels… This is akin to selling a stock at the lows. Not bullish sign towards getting back to either peak revenue levels or the LT growth algo after that. Definitely not a bullish signal towards the hope of ever getting back to peak EBIT margins. But sadly, it might just be necessary and acknowledging that earlier is better than later.
Personal message to Trussell: please put analysts that know your company (or just athletic in general) better towards the front of Q&A going forward. Of all the things to ask at #1 in Q&A, Lorraine asks why EMEA slowed (widely known and they even hinted at last quarter) and not even sure what Adrienne at #2 asked other than a how do they think about guidance question. Simeon at #3 asks DTC gross margin color. Guys this isnt an Abercrombie & Fitch call. Binetti at #4 is the model king so of course he would ask a non-strategic question but at least it was a good question about the implied guidance of EMEA heading into World Cup. Nike is very good about doing sellside analyst callbacks so would be nicer if these analysts caught up to everyone else during that moment and focused on the new information here instead (supply chain, ACG, Nike Mind, etc, etc, etc).
Finally, we get a real question from Brooke at #5: Stabilization of sportswear business. This is a big problem right now at the company given the size of that business. They prioritized performance business – sport creates the halo for everything else. “The AF1 and AJ1 stabilized this quarter” – Elliott Hill today but am pretty sure we heard that about one of those franchises a quarter or two ago. “Still stabilizing in the Dunks” – think that was originally supposed to happen by now.
Matt Boss with last question (#7) not only asked a good strategic question following up on sportswear but also a better model question than all those before him (self-inflicted headwind vs. underlying demand). North America should sustain momentum. Overall managing sell-in to shift marketplace inventory to full price. China sounded like a project. Overall the tone here was a bit more negative on EMEA (and maybe even APLA) than before in our opinion.
*These are our unabridged quick thoughts and notes from the call. We get them out as soon as possible after the call ends. Management has given some topics to dig deeper into and will circle back afterwards with much more in depth work on what was mentioned. You can find that work (and more on Nike and other retail/consumer research) at our website here: M Squared Capital
Originally posted on X and Substack.