Nike Revenue Falls Short, But Beats Estimates with Strong Non-GAAP Profit
Nike's Q3 revenue fell short of Wall Street expectations, dropping 4.3% year-on-year to $11.21 billion. However, the company's non-GAAP profit of $0.48 per share was 10.5% above analysts' consensus estimates.
The decline in revenue was attributed to deliberate reductions in Sportswear and Jordan Brand volumes, as well as ongoing inventory clean-up in Greater China. Management cited a need for greater product differentiation in the Sportswear segment, which was hit by a nearly 50% cut in Dunk sneaker supply, resulting in a $200 million headwind.
Nike is also implementing a scarcity model for Jordan Retro products, aimed at rebuilding brand desire and long-term profitability. This strategy is expected to hurt near-term sales but will focus on premium flagship storefronts and increased localization.
The company's 'Pace' program aims to consolidate global regions, build new capabilities in India, and streamline decision-making, targeting $2.5 billion in cost savings over several years. Management expects continued pressure on revenue and operating margin as strategic resets play out over multiple quarters.