Nike Inc. surpassed third-quarter 2026 earnings expectations despite an aggressive inventory reset that pressured its top line, as executives chart a definitive path to complete the sportswear giant’s turnaround by the end of the calendar year.
Nike reported the third-quarter revenue of $11.3 billion and earnings per share of $0.35, outperforming Wall Street estimates of $11.23 billion and $0.30, respectively.
However, the company faced significant short-term pressures as it actively cleared out excess classic footwear franchises to make room for fresh innovation.
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“One of the most important actions we took this quarter was further removing unhealthy inventory… from the marketplace,” said President and CEO Elliott Hill.
He noted this aggressive clearing created a roughly five-point headwind to reported results, but emphasized it was an “intentional” and “necessary” maneuver to improve marketplace health and secure sustainable long-term growth.
While Hill acknowledged the broader turnaround is “taking longer” than initially anticipated, he cited early victories—such as a 20% surge in the Nike Running category—as proof the strategy is working.
The company is actively shifting from a strictly direct-to-consumer approach back to a balanced, integrated wholesale marketplace.
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“By the end of the calendar year, we expect to have finished our win now actions,” Hill stated. He stressed that the ongoing rebuilding process is deliberate, focusing heavily on athlete-led performance products rather than relying solely on legacy lifestyle and streetwear brands.
Despite the top-line revenue beat, cleanup efforts and macro challenges are temporarily squeezing the company’s profitability.
Gross margins declined 130 basis points to 40.2%, heavily impacted by new North American tariffs, a $230 million severance charge to restructure supply chains, and elevated marketplace markdowns.
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CFO Matthew Friend cautioned that aggressive promotional activity across the digital space continues to be a “headwind to gross margin profitability.”
