Financial Report Performance: Exceeding Expectations and Concerns

On March 21, 2025, Nike released its third quarter financial report for fiscal year 2025, with revenue of $11.3 billion, exceeding analysts' expectations of $11.01 billion, of which self-operated business contributed $4.7 billion, dealer business revenue was $6.2 billion, and Greater China revenue was $1.7 billion. Despite the impressive revenue performance, net profit fell sharply by 32% year-on-year to $794 million, and gross profit margin fell by 3.3 percentage points to 41.5%. This contradictory data reflects Nike's dual pressures in cost control and market competition.

However, the market is more concerned about the company's pessimistic expectations for the fourth quarter: sales are expected to fall by about 15% year-on-year, and gross profit margin may fall by another 4-5 percentage points, and this trend may continue until fiscal year 2026. This guidance was far below analysts' expectations, which directly led to a 6.78% plunge in the stock price after the financial report was released, triggering market concerns about Nike's future growth capabilities.

Three core causes of the stock price decline

  1. Tariffs and cost pressures
    Nike has recently faced the impact of an additional 20% tariff. About 24% of its suppliers are located in the affected areas. If the costs cannot be passed on, profit margins will be under pressure. In addition, global supply chain problems have not been fully alleviated, and production and logistics delays have exacerbated cost pressures. Although the company tried to clear inventory through discounts (inventory decreased by 2% year-on-year), this move further eroded gross profit margins.
  2. Weak consumer confidence and demand differentiation
    Macroeconomic uncertainty has led consumers to cut non-essential spending, and the sports footwear and apparel market has been the first to bear the brunt. Nike's sales in the North American market fell 4% year-on-year. Although better than expected, the "double-digit decline" in January and February exposed weak demand. Young consumers have reduced brand loyalty, and the rise of competitors (such as Lululemon and emerging sports brands) in the market segment has also diverted Nike's traditional customer base.
  3. Short-term pain of transformation strategy
    The "Win Now" strategy promoted by CEO Elliott Hill focuses on product innovation and channel optimization, such as accelerating the clearance of old inventory and expanding investment in the women's sports market (such as launching a joint series with Skims). However, these measures are difficult to offset the impact of the decline in classic product sales in the short term. Direct sales channel revenue fell 12% year-on-year, and wholesale channels fell 7%.

Subsequent trends: risks and opportunities coexist

Short-term risks:

  • Uncertainty of policies and macroeconomics: If the tariff policy continues, high inflation and interest rate fluctuations may further suppress consumer demand.
  • Inventory and price war risks: If the inventory clearance speed is slower than expected, it may trigger a larger price reduction, further compressing profit margins.

Long-term opportunities:

  • Innovative products and market segment breakthroughs: Nike's new "Pegasus Premium Edition" has strong pre-sales performance in North America, and plans to expand distribution scale; cooperation and marketing in the field of women's sports (such as Super Bowl advertising) are expected to attract new customers.
  • Digital transformation and regional growth: Greater China accelerates strategic transformation and optimizes its operating portfolio, which may become a future growth engine.
    Analysts' views and investment advice

Morgan Stanley and other institutions believe that Nike's brand influence still exists, but it needs to reshape its product competitiveness through innovation and pay close attention to supply chain and cost control. The current stock price decline may provide long-term investors with a low-level layout opportunity, but they need to be wary of short-term volatility risks.

Key observation points:

  • Market response to new products in autumn 2025;
  • Tariff policy changes and cost transfer capabilities;
  • Sales data of women's sports product lines.

Conclusion

Nike's stock price decline this time is not only a direct response to the financial report guidance that is lower than expected, but also the market's doubts about its strategic execution in a complex environment. Short-term pain may be difficult to avoid, but if it can strike a balance between innovation, cost and consumer insights, it is still expected to regain growth momentum. Investors need to weigh the risks and pay attention to marginal improvement signals in the transformation process.

*Disclaimer: The content of this article is for learning only, does not represent the official position of VSTAR, and cannot be used as investment advice.