According to the Zhitong Finance APP, Nike (NKE.US) warned on Thursday that due to the longer-than-expected time required for the recovery plan of this sneaker giant, along with challenges from new tariffs and declining consumer confidence, sales are expected to decline by double-digit percentages this quarter.In a conference call with analysts, Chief Financial Officer Matt Friend stated that Nike expects the sales decline for the fourth quarter of the fiscal year ending in May to be at the lower end of the &#34;around 15%&#34; range. Additionally, due to intensified efforts to clear excess inventory and outdated styles that are no longer favored by consumers, as well as the impact of tariffs imposed by the U.S. on products from China and Mexico, the company's gross margin is expected to decline by 4 to 5 percentage points, and this process is expected to continue until the fiscal year 2026.Friend stated, &#34;We believe that the fourth quarter will reflect the maximum impact of our current actions, and the headwinds on revenue and gross margin will begin to ease from here. We are also dealing with multiple external factors that create uncertainty in the current operating environment, including geopolitical dynamics, new tariffs, exchange rate fluctuations, and tax regulations, as well as the impact of this uncertainty and other macro factors on consumer confidence.&#34;This performance guidance is far below analysts' expectations. According to consensus estimates from LSEG, Wall Street had previously expected sales to decline by 11.4% this quarter.After the news was released, Nike's stock price fell by more than 4% in after-hours trading, with a cumulative decline of over 5% this year.Despite the poor performance guidance, Nike's performance in the third fiscal quarter still exceeded Wall Street's expectations.For the three months ending February 28, the company reported a net profit of $794 million, or 54 cents per share, compared to $1.17 billion, or 77 cents per share in the same period last year, with market expectations at 29 cents.Sales fell to $11.27 billion, down about 9% from $12.4 billion in the same period last year, with market expectations at $11.01 billion. Like other retailers, Nike saw strong demand in December last year, but experienced a &#34;double-digit&#34; decline in January and February.However, it is worth noting that Nike's performance exceeded expectations mainly due to the lower market expectations prior to the earnings report.The company's gross margin for the quarter declined by 3.3 percentage points to 41.5%, below the market expectation of 41.8%. This was primarily due to the costs incurred by Nike to clear old inventory and launch new innovative styles. The company attributed the decline in gross margin to &#34;higher discounts, higher inventory write-down reserves, higher product costs, and changes in channel mix.&#34;Meanwhile, the decline in sales was mainly due to weak performance in the Chinese market. In this key region, sales fell by 17% to $1.73 billion, below the market expectation of $1.84 billion.Morningstar analyst David Swartz stated that although the overall performance exceeded Wall Street's expectations, the &#34;lackluster performance&#34; in the Chinese market cannot be overlooked.In October last year, Elliott Hill, who had long served as a Nike executive, returned to the company after retirement to take over as CEO. After a year of declining sales and company layoffs, he is working to turn the business around and restore growth. He is focused on winning back wholesale partners, reigniting innovation enthusiasm, and attracting athletes who have turned to new competitors, but these efforts have yet to yield resultsHill stated in a conference call with analysts: &#34;First of all, I want to say that I am proud of the progress we have made on the key actions we committed to 90 days ago. While we have met the set expectations, we are not satisfied with the overall results. We can and will do better.&#34;In this quarter, Nike's direct channel sales fell by 12% to $4.7 billion. Wholesale revenue decreased by 7% to $6.2 billion.Additionally, since Hill took office, the company has faced a series of new dynamics that may make its recovery more difficult.In the three months since Nike last announced its financial results, Trump imposed a new 20% tariff on goods imported from China, consumer confidence declined, and retail sales in January and February fell short of expectations.According to a manufacturing information disclosure released in January, about 24% of the hundreds of suppliers and manufacturers Nike works with are located in China. If retailers do not raise prices to offset the tariffs and cannot fully pass on costs to suppliers, Nike's profit margins are expected to be impacted by the new tariffs. In Thursday's earnings call, Nike did not specify whether it would raise prices or how the new tariffs would specifically affect profit margins.Moreover, when consumer confidence is low and spending is cut, non-essential items like new clothes and shoes are often the first to go, with consumers opting for necessities instead. Over the past few years, the overall sneaker and apparel market has been weak as consumers have reduced their purchases of clothing and shoes. However, until recently, strong companies continued to perform well and gained market share from weaker competitors.However, this trend began to shift in recent weeks, with even the strongest companies starting to warn of weak consumer spending when announcing first-quarter results, raising concerns about the health of the economy.In this quarter, sales in Nike's largest market—North America—fell by 4% to $4.86 billion. Nevertheless, revenue in the region still exceeded analysts' expectations of $4.53 billion.There is widespread expectation that Nike will regain lost market share and reset its business, with some insiders stating that the company's problems have been exaggerated. Even so, tariffs and economic concerns may mean that the recovery for retailers could take longer and be more challenging than expected.The key to Nike's transformation plan lies in its ability to reignite innovation and create the kind of industry-leading footwear and apparel products that have long made it a market leader. In the conference call with analysts, Hill noted that the company's new Pegasus Premium line had &#34;almost sold out&#34; in its early release in North America and will expand its sales scale in the fall of 2025. The Vomero 18, designed for everyday runners, has achieved &#34;outstanding&#34; results, and Nike plans to double its issuance before mid-April.Hill stated: &#34;It will take time to reach sales levels sufficient to replace our over-reliance on a few classic product lines, but our approach is simple: to make consumers fall in love with Nike's new products, rather than replacing one classic product with another.&#34;Nike has made progress in regaining market share and expanding its female customer base, which is a key component in boosting revenue and apparel sales. Last month, the company announced a collaboration with Kim Kardashian's lingerie brand Skims to launch a new product line called NikeSKIMS, which includes apparel, footwear, and accessories. This highly anticipated collaboration is expected to help Nike better penetrate the female market and enable it to compete more effectively with Lululemon (LULU.US), Alo Yoga, and Vuori, brands that currently cater more to female consumers than Nike.Additionally, Nike launched a new advertising campaign targeting female athletes during the Super Bowl, marking the first time in decades that it has advertised during a major event. This campaign indicates that attracting female athletes and capturing the momentum of women's sports will be a core focus of the Hill strategy.If Nike can continue to show positive signs from new product launches and collaborations, other adverse factors may be seen as insignificant distractions.Bloomberg Intelligence analyst Poonam Goyal stated that this performance indicates &#34;the recovery is beginning to show,&#34; but &#34;the company still has a lot of work to do in reducing inventory.&#34;Jefferies analyst Randal Konik also believes that the performance shows Nike has &#34;made a good start on its two-year recovery journey.&#34; He cited positive signals from new products, inventory clearance, and the rebuilding of relationships with wholesalers

Nike warned on Thursday that due to a recovery plan exceeding expectations, along with new tariffs and declining consumer confidence, Q4 sales are expected to drop by around 15%. CFO Matt Friend stated that gross margins are expected to decline by 4 to 5 percentage points, and this trend will continue into fiscal year 2026. Despite exceeding expectations in the third fiscal quarter, Nike's stock price fell by more than 4% in after-hours trading

- Nike has warned of a projected double-digit sales decline this quarter due to delays in recovery plans, new tariffs, and decreased consumer confidence.  
- CFO Matt Friend indicated that sales for the fourth quarter are expected to drop around 15%, with gross margins declining by 4 to 5 percentage points, influenced by excess inventory and tariffs.  
- Despite these challenges, Nike's third-quarter performance exceeded Wall Street expectations, reporting a net profit of $794 million, although sales fell 9% year-over-year, particularly impacted by a 17% decline in the Chinese market.

Tariff pressure and declining consumer confidence hit hard! Nike warns that Q4 sales may see a double-digit decline