Profit plunges, guidance weakens! NIKE, Inc. Class B (NKE.US) falls behind in recovery pace, stock target price lowered by major banks post earnings.

The latest financial report released by NIKE, Inc. Class B (NKE.US) is seen as a signal of the uneven recovery process of this sports apparel giant. Wall Street analysts have expressed cautious views on the stock and have lowered their target price for it. As of the time of writing, NIKE, Inc. Class B dropped over 11% in pre-market trading on Wednesday, hitting a yearly low. The financial report for the third quarter of the 2026 fiscal year released by NIKE, Inc. Class B after the stock market closed on Tuesday showed that the company's quarterly revenue was $11.3 billion, flat year-over-year (down 3% when calculated at fixed exchange rates), which was better than market expectations. Net profit was $520 million, down 35% year-over-year. The gross profit margin has contracted for the sixth consecutive quarter, down 130 basis points to 40.2% year-over-year, with the company attributing this mainly to the increase in North American tariffs. Regionally, the North American headquarters was the main driver of the revenue growth in this quarter, with a 3% year-over-year increase. The Greater China region still faces downward pressure on performance, with revenue down 10% to $1.615 billion year-over-year, but the inventory unit count decreased by over 20%. NIKE, Inc. Class B Chief Financial Officer Matthew Friend stated, "The performance of the third quarter is in line with our expectations, and the team continues to advance execution orderly and steadily. The 'Win Now' action will continue to impact performance within this calendar year, and we remain confident in the company's long-term profitability growth." He predicted that although there is slight growth in the North American region, he expects a low-single-digit decline in revenue for the full fiscal year of NIKE, Inc. Class B. Due to the volatility brought by the rise in oil prices and continued conflict in the Middle East, the revenue for the fourth fiscal quarter of NIKE, Inc. Class B is expected to decline by 2 to 4%, with sales in the Chinese market expected to decline by 20% this quarter. RBC Capital Markets analyst Piral Dadhania stated that the institution remains constructive on the mid-term recovery potential of NIKE, Inc. Class B. However, the recovery process is expected to be longer than initially anticipated due to the drag on performance from the Greater China region, Converse, and the sports apparel business. The positive aspect is that the management of NIKE, Inc. Class B appears willing to make tough decisions to address issues and reshape the business through the "Win Now" strategy for long-term sustainable growth. The institution sees this strategic direction as correct. RBC Capital has lowered the target price for NIKE, Inc. Class B to $70 while maintaining an "outperform the market" rating. BTIG has also lowered the target price for NIKE, Inc. Class B to $75, citing a longer than expected recovery time. However, analyst Robert Drbul and his team remain confident in the long-term development trajectory of this "buy" rated stock. The analyst stated, "As the company gradually absorbs the pressure from tariffs, we expect its profit margin to show a positive turning point in the second quarter of the 2027 fiscal year. We still believe that the company has significant room for profit margin recovery in the 2027 and 2028 fiscal years, and achieving the double-digit operating profit margin target will drive potential earnings per share above $3." Needham has a more cautious view on the current situation of NIKE, Inc. Class B. Analyst Tom Nikic warned, "While some key elements in the 'Win Now' strategy (such as refocusing on sports, wholesale channels, marketing, etc.) are reasonable, the external environment is extremely challenging, and the difficulties that the former CEO may have put the company into seem deeper than initially appeared." Needham maintains a "hold" rating for NIKE, Inc. Class B. Bank of America Corp has downgraded its rating for NIKE, Inc. Class B from "buy" to "neutral." Analyst Lorraine Hutchinson stated, "The strong performance of the running business and the North American market was a reason for our patience, but considering that the sales turning point is expected to take nine more months, we believe there is limited room for multiple expansion."