Q3 2026 Earnings Call Transcript

Good afternoon, everyone, and welcome to NIKE, Inc. Third Quarter Fiscal 2026 Conference Call. For those who want to reference today's press release, you will find it at investors.nike.com. Leading today's call is Paul Trussell, VP of Corporate Finance and Treasurer. I would now like to turn the call over to Paul Trussell. Thank you, operator.

Hello, everyone, and thank you for joining us today to discuss NIKE, Inc.'s Third Quarter Fiscal 2026 results. Joining us on today's call will be NIKE, Inc. President and CEO, Elliott J. Hill, and EVP and CFO, Matthew Friend.

Before we begin, let me remind you that participants on this call will make forward-looking statements based on current expectations, and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in NIKE, Inc.'s reports filed with the SEC. In addition, participants may discuss non-GAAP financial measures and nonpublic financial and information. Please refer to NIKE, Inc.'s earnings press release or NIKE, Inc.'s website, investors.nike.com, for comparable GAAP measures and quantitative reconciliations.

All growth comparisons on the call today are presented on a year-over-year basis and are currency neutral unless otherwise noted. We will start with prepared remarks and then open the call for questions. We would like to allow as many of you to ask questions as possible in our allotted time, so we would appreciate you limiting your initial question to one. Thank you for your cooperation on this.

I will now turn the call over to NIKE, Inc. President and CEO, Elliott J. Hill.

Thank you, Paul. Last quarter, we said we were in the middle innings of our comeback. Since then, we have continued to take meaningful actions to improve the health, quality, and foundation of our business. While we are not satisfied, I am confident that our progress in the areas we prioritized first through our Win Now actions point to where we are ultimately heading across our portfolio.

Because of the scale and breadth of the NIKE portfolio, that progress will not happen all at once. We have approached this comeback deliberately across brands, sports, geographies, and channels, with some parts of the portfolio moving faster than others. One of the most important actions we took this quarter was further removing unhealthy inventory of our classic footwear franchises from the marketplace. That created roughly a five-point headwind to our reported results.

It was intentional. It was necessary. And while it weighed on the quarter, it is improving the health of the marketplace, the quality of our revenue, and the foundation for more sustainable growth ahead. As we were removing unhealthy inventory, we focused first on the areas that create the greatest impact.

We focused on our sport offense in Running, our largest performance sport, and in Football, the beautiful global game. We focused on athlete-centered innovation, building platforms that can scale across multiple sports and price points over time. We focused on our wholesale business, the environment where the majority of our consumers shop, where we needed to prove we could compete and win back market share. And we focused on paying it all off in North America, our largest geography that drives nearly half of our business.

These are the dimensions that are furthest along, and each is absolutely essential to turning around this company. At the same time, other parts of the portfolio, including Greater China, Converse, and Sportswear, are still earlier in their comebacks. We have new leadership in place, clearer strategies taken straight, and structural changes underway designed to strengthen these businesses over the long term. We are moving with urgency.

We are not simply fixing what needs to be fixed. We are building, brand by brand, sport by sport, country by country, partner by partner. We are reshaping our marketplace, rewiring how we operate, and investing in the technology platforms that we expect will help us serve more consumers better and run our business more effectively. These actions will continue to create near-term pressure, but we believe they are the right actions to strengthen NIKE for the long term and create more durable value for shareholders.

This is complex work, and parts of it are taking longer than I would like. But the direction is clear. The urgency is real. And the foundation is getting stronger.

By the end of the calendar year, we expect to have finished our Win Now actions. Aged inventory across the marketplace will be healthy, allowing our sports teams to consistently flow athlete-led, innovative, and coveted products in all sports across our three brands, including NIKE Sportswear and Jordan Streetwear. Our marketing teams will be creating even more locally relevant, inspiring stories in key countries and cities around the world. Our account teams will be elevating those stories and our brands at point of sale with consumer-right assortments and presentations, which will all result in more balanced, profitable, and sustainable growth across the integrated marketplace, owned and partnered, digital or physical.

And because we are now far enough into the work and clear enough on the path ahead, this fall, we will share a more detailed long-term view of the business at an Investor Day at the Phil H. Knight campus in Beaverton. We look forward to sharing more about the future of NIKE later in the calendar year. Turning to the quarter.

I will start with the dimensions that I consider to be progressing fastest in the comeback. NIKE Running was the first team to move into the sport offense. They created a clear product construct based on athlete insights, segmented and differentiated assortments across an integrated marketplace, and elevated our presence and storytelling at retail. The consumer is feeling the impact of the full offense, with NIKE Running up over 20% for the quarter.

NIKE Running has created the roadmap for other sports to follow. Global Football is the next sport to fully transform into the sport offense. For the 2026 World Cup, it starts with our footwear construct that successfully launched the Tiempo in Q3, and we will unveil the new material in June. In apparel, we will deliver AeroFit kits for our competing NIKE federations, including a Jordan away kit for Brazil.

We are also utilizing the World Cup as an opportunity to catalyze the Football marketplace for quarters to come. By the end of the tournament, we will have elevated our presentation in more than 5,000 Football doors around the world, with wholesale partners and NIKE Direct. Because winning in Football goes beyond winning the World Cup. We win through the clásicos, the derbies, and Copa, with colleges and youth clubs in every neighborhood, season after season.

In innovative product, we are back to leading big ideas for our industry. In just one quarter, we delivered both footwear and apparel platforms with deep insights that leverage years of scientific research from our labs, owned IP, and advanced manufacturing. Our new NIKE MIND platform, with over 150 patents filed globally, was the highlight of the quarter. Designed to help athletes clear away distractions pre- and post-competition, the MIND won.

Sold out. All geographies. We responded by doubling production of NIKE MIND over the next two seasons to meet demand from more than 2 million consumers who signed up for “Notify Me” on nike.com. Following NIKE MIND, we introduced several early-stage innovation platforms this quarter.

We used NIKE Air for the first time ever as a self-inflated thermal layer in apparel, unveiled a new liquid Air Max platform that is low to the ground and moves naturally with the foot, and we delivered AeroFit for Football, our new elite apparel cooling platform that increases airflow by 200% over regular Dri-FIT. It will expand into multiple sports, including NIKE Running in the fall. These platforms are scalable foundations for growth that we can extend into multiple sports and price points over time. Recently, our leadership team reviewed our full innovation agenda for 2027 and 2028 by brand and by sport.

That focus is showing up in sharper athlete insights and more complete head-to-toe solutions, and we are excited to share a vision for the future of sport with you this fall. And, yes, innovation sparks demand. But products alone do not deliver long-term growth. For years, we were running a NIKE Direct-first offense.

Now we are rebalancing our offense through an integrated and elevated marketplace, and running a Key City offense. These moves require us to rewire our supply chain and upgrade our technology platforms. You saw the early signs of those actions this quarter, and it is a critical step in our return to double-digit EBIT margins. Many of our Win Now actions are being paid off first in North America.

One of our strongest executions this quarter was the NBA All-Star Weekend, which connected us to consumers and drove full-price sell-throughs while deepening our wholesale partnerships in Los Angeles with Shoe Palace, Dick's, and Foot Locker. The experience set the tone for how we will show up in LA for the World Cup, Super Bowl, and the 2028 Olympics. Across all dimensions in North America, our wholesale momentum is accelerating. It is sporting goods.

Dick's and Academy are leaning in with us to tell more sport performance stories. We are building long-term plans with Foot Locker and JD in athletic specialty. And we are fully committed to our partners in running specialty, Football specialty, and city specialty through our investments in product innovation and presentation. Ultimately, this is about creating a more profitable business model for both sides of the partnership.

In NIKE Direct, we have elevated our own experiences, setting the standard for how our brands show up in the marketplace. We have intentionally cleaned the market in all channels. The teams are hyper-focused on consumer-right assortments and presenting them in environments that tell our best innovation stories, all with the goal of accelerating sell-through. If Running shows what our sport offense can do, North America shows the power of our complete portfolio in an elevated, integrated marketplace.

From here, we expect that to translate into consistent growth in North America. I will finish with the areas of our business that are earlier in the journey, starting with our growing portfolio of emerging brands. This quarter, we tapped into the energy of the Winter Olympics in Milan and Cortina to build excitement around ACG. It was a world-class execution that showcased the ACG logo on all Team USA athletes.

We executed creative brand marketing, including an experiential chain from Milan to the Alps called the All Conditions Express, and we elevated our presentation in more than 600 retail doors around the world, including a stand-alone ACG door in Beijing. The NIKE ACG team is committed to serving the outdoor athlete by creating the world's most innovative footwear, apparel, and accessories, building our presence authentically over time by supporting world-class racers and events, and building long-term partnerships with the retailers who authentically serve outdoor athletes. The outdoors is a tremendous opportunity for NIKE as we bring excitement and a fresh perspective to the consumers and the industry.

In NIKE Sportswear and Jordan Streetwear, our teams are moving from playing defense to playing offense. Matt shared last quarter that by the end of this fiscal year, we will have intentionally reduced over $4 billion of revenue from the peak levels of classic footwear franchises. A cleanup of that scale is significant and has taken several quarters to execute. From here, we are investing in a more sophisticated city offense, one that incubates new styles through different consumers and channels, account by account.

And as you know, there is both an art and a science to seeding, igniting, and scaling new Sportswear styles. A great example this quarter is the strong sell-through we drove around the globe with a more thoughtful approach to the reintroduction of the Air Max 95. That city-led approach is especially important in EMEA, where we lack a fully integrated marketplace and it has been one of our biggest hurdles. The team is responding with a more complete street-up model, working more closely with wholesale partners to improve point-of-sale storytelling and seeding in the community. In EMEA, you will see us show up more as a local NIKE.

Greater China, too, will benefit from a more local approach and closer connection with the consumer on the ground. We have become clearer on the structural challenges in China and the channel dynamics in the marketplace. We are taking action to clean the marketplace, tighten execution across digital and physical retail, and rebuild the brand locally through sport. It will take time, but we remain confident that serving 1.4 billion potential athletes in China is one of the most powerful opportunities in sport.

In Converse, the team took some decisive steps this quarter to bring the brand back to a healthy business. Converse is a beloved brand that serves a distinct consumer through their connection to creative culture, music, and youth. Converse will remain an important part of the NIKE, Inc. family, and we are excited about its long-term prospects. Overall, the work is not finished.

But the direction is clear. Our teams are moving with focus and urgency, and our foundation is getting even stronger. I am going to pass it over to Matt, and I will come back on to close out the call.

Thanks, Elliott, and hello to everyone on the call. As Elliott outlined, we are seeing real progress across the business. Our initial focus on sport was important because it sets a strategic repositioning of our brands. Momentum in Running continues to be strong, and we expect Football, Training, and Basketball to return to growth over the next few quarters.

Yet sport dimensions currently represent less than half of our total portfolio, and Sportswear continues to be a headwind to revenue growth, as it declined low double digits in the quarter. In the marketplace, relationships with our wholesale partners are strong, and our ways of working look very different than they did 12 months ago. Order books are growing, and we are taking back shelf space. However, sell-through trends are not yet where we want them to be.

Despite making progress versus a year ago, digital is still too promotional. Markdowns across the marketplace remain elevated. Our teams are pulling levers to manage inventory and protect brand health, but this continues to be a headwind to gross margin profitability. While our comeback is taking longer than we would like, we are confident we are on the right path, and we have a clear set of plans in place to complete our Win Now actions by the end of the calendar year.

Now let me turn to our third quarter results. For this quarter, revenues were flat on a reported basis and down 3% on a currency-neutral basis. NIKE Direct was down 7%, with NIKE Digital declining 9% and NIKE stores down 5%. Wholesale grew 1%.

Gross margins declined 130 basis points to 40.2% on a reported basis, primarily due to 300 basis points associated with higher tariffs in North America. SG&A was up 2% on a reported basis versus the prior year, due to employee severance charges we incurred in the quarter. We also had other income from legal settlements. Our effective tax rate was 20%.

Earnings per share was $0.35. Inventory decreased 1% versus the prior year, with units down mid single digits. Let me provide some additional context on the $230 million charge we incurred this quarter due to employee-related severance costs, primarily in Supply Chain and Technology. During the pandemic, we accelerated investments across Supply Chain and Technology to support a larger digital and direct business. Those investments also resulted in a higher fixed cost base that weighed significantly on our EBIT margins as revenue came down.

Given the strategic shifts we have made to serve a more balanced and integrated marketplace, we have begun to take meaningful steps to reset our cost base to improve NIKE's long-term profitability. Our specific actions in the Supply Chain will lower costs, streamline operations, and reduce capacity in our distribution network. Over time, we will shift our Supply Chain network to become more of a variable cost versus the higher fixed cost structure we have today. In Technology, we continue to optimize our workforce, rationalize programs, and leverage new advanced capabilities.

We also right-sized operating costs at Converse this quarter, which was included in this charge as well. We continue to evaluate opportunities related to Supply Chain, which could result in additional financial impacts in future quarters. While we believe the actions taken this quarter will represent the largest financial impact, we expect benefits from these actions to begin in fiscal 2027 and continue to build through fiscal 2028. Now I will turn to performance in the geographies, including key highlights and actions we are taking to drive progress against our Win Now actions. In North America, Q3 revenue grew 3%.

NIKE Direct declined 5%, while NIKE Digital was down 7%. NIKE stores were down 1%. Wholesale grew 11%. EBIT declined 11% on a reported basis.

North America is leading our comeback and is well positioned to sustain the momentum as we move forward. Running and Global Football grew double digits, with Basketball up high single digits, while Sportswear declined double digits. Our digital business improved sequentially throughout the quarter, driven by strong launch and growth in key sports, as well as continued improvement in average retail discounts. Wholesale revenue growth was driven by new distribution and lapping marketplace management actions with existing partners in the prior year.

While sell-through has been below plan, sell-through improved in February, and we drove positive growth in all channels in the geography for the first time in two years. Inventory dollars grew low single digits, while units were down high single digits, with the spread primarily due to tariffs. Closeout units remain low, and the mix is healthy. From a margin recovery perspective, North America gross margins declined 360 basis points versus the prior year, despite nearly 650 basis points of gross impact from new U.S. tariffs.

Underlying profitability has now improved over three consecutive quarters, giving us confidence that we can recover the transitory headwinds to margin associated with our Win Now actions. And last, we are increasingly confident we are on track to return to balanced growth in North America across both NIKE Direct and wholesale channels in the near term. In EMEA, Q3 revenue was down 7%. NIKE Direct declined 13%, with NIKE Digital down 6% and NIKE stores down 20%.

Wholesale was down 4%. EBIT increased 7% on a reported basis. EMEA presented both progress and challenges in the quarter, and the team continued to take action in a highly promotional marketplace. Our performance business continued to build momentum, led by double-digit growth in Running.

Sportswear was down double digits, and sell-through has not tracked with sell-in expectations. Promotions across the marketplace were up versus the prior year as partners manage inventory. We were also more aggressive with promotions on NIKE Digital at the end of the season, which resulted in higher markdowns and a higher off-price mix. Inventory grew double digits versus the prior year, with units up mid single digits.

Given the softness in Sportswear, traffic patterns, and promotions across Europe, as well as recent disruption in the Middle East, we anticipate ending the fourth quarter with elevated inventory. In Greater China, Q3 revenue declined 10%. NIKE Direct declined 5%, with NIKE Digital down 21% and NIKE stores up 1%. Wholesale declined 13%.

EBIT increased 11% on a reported basis. This quarter, we made forward progress in Greater China. Running grew double digits in the quarter, and we also saw growth in Tennis, Golf, and ACG, and Kids was flat. Sportswear declined double digits as expected.

Wholesale sell-in was managed down, while seasonal sell-through rates sequentially improved. We expanded our NIKE store pilot to 100 doors, including our House of Innovation door in Shanghai, obsessing store assortments, storytelling, and replenishment, and this resulted in traffic and comp sales improving versus the prior year. We implemented shifts to manage our brand presence differently across all digital platforms, pulling key styles off discounts, resulting in higher full-price realization for these styles. Inventory was down mid teens versus the prior year, with units down more than 20%, and partner inventory also declined double digits.

With new leadership now in place, we expect to take additional actions to improve our position in the coming quarters. We will continue to reduce near-term sell-in to align with full-price demand, clean up the digital channel, and reduce the amount of aged inventory in the marketplace. We expect these actions will continue throughout fiscal 2027 and remain a headwind to revenue growth, while profitability should bottom sooner as marketplace management makes progress. In APLA, Q3 revenue was down 2%.

NIKE Direct declined 8%, with NIKE Digital down 12% and NIKE stores down 3%. Wholesale was up 3%. EBIT declined 4% on a reported basis. In the quarter, we saw bright spots: Running up double digits and growth in Training and Football, while Sportswear declined double digits.

We had a strong launch of NIKE Skims in Australia and Korea, and launched new Cricket footwear innovation at the T20 Cricket World Cup. NIKE flagship stores in Tokyo and Seoul drove positive growth for the quarter. While inventory grew high single digits versus the prior year, units declined low single digits, as the team made progress in certain countries. Closeout mix remains elevated, and the team is focused on the actions to address excess inventory over the coming quarter.

We expect performance across territories in APLA to remain mixed in the near term. Now I will turn to our outlook. You heard Elliott say that while our comeback is taking longer than we would like, we have a clear set of plans in place, and we expect to complete our Win Now actions by the end of the calendar year. Over these next nine months, there will continue to be puts and takes across the revenue and gross margin lines of our business.

At the same time, we are even more confident in where we are headed. Therefore, we want to provide greater visibility to how we see the business trend from here through the end of this calendar year. We expect revenues to be down low single digits versus the prior year, with gains in North America offset by declines in Greater China, driven by intentionally reduced sell-in and marketplace management actions over that period. While the tariff environment has been uncertain, assuming no significant changes, we expect Q2 fiscal 2027 to be the final quarter where higher tariffs continue to be a material year-over-year headwind to gross margin.

We expect gross margin expansion to begin in the second quarter due to actions to mitigate tariffs and recovery of transitory impacts from Win Now. We expect earnings to be flattish with gross margins beginning to inflect and disciplined SG&A management, setting the foundation for earnings recovery from there. We also recognize that the environment around us has become increasingly dynamic, and we could experience unplanned volatility due to the disruption in the Middle East, rising oil prices, and other factors that could impact either input costs or consumer behavior. We are focused on what we can control, and these assumptions reflect the macro environment as it stands today.

Now I will share a specific outlook for Q4 fiscal 2026. We expect revenues in Q4 to be down 2% to 4%, with modest growth in North America despite lapping a value liquidation in the prior year, largely offset by declines in Greater China and Converse. We expect Greater China to be down approximately 20% in the fourth quarter, reflecting reduced sell-in that we highlighted last quarter, as well as accelerated actions to clean up the marketplace. We anticipate a two-point benefit from foreign exchange. We expect sequential improvement in gross margin, with Q4 down approximately 25 to 75 basis points, including 250 basis points due to higher tariffs in North America.

We expect Q4 SG&A dollars to be flat to down slightly. We expect other expense, net of interest income, to be an expense of $15 million to $25 million in the fourth quarter. And we expect our full-year tax rate to be in the low 20% range. And last, we will return to providing full-year and long-term guidance at our Investor Day in the fall.

With that, I will pass it back to Elliott.

Thanks, Matt. Before we move to your questions, I want to leave you with an image that stayed with me from this quarter. I was in Barcelona meeting with athletes and leaders from FC Barcelona, a partner of ours since 1998, and I stood on the pitch at Camp Nou. If you have ever been there, you know it is more than a stadium.

It is one of the most imposing stages in sport, a place built for pressure, belief, and unforgettable moments. And right now, Camp Nou tells another story too. Above the pitch, there is scaffolding. In the corners, there are cranes.

Entire sections are unfinished. The stadium is being rebuilt tier by tier, piece by piece, to accommodate over 100,000 supporters. The work is still underway, capacity right now is limited, and it requires patience and perseverance. And still, the supporters are in full voice.

The players are still stepping onto the pitch, focused on competing and winning. And all around them, the work is transforming what their home, their club, will become. What stayed with me was the reality of both things being true at once: competing today while building for tomorrow. FC Barcelona did not choose between performing in the present and preparing for the future.

They are doing both at the same time. Standing there looking up at the Hatfield Stadium, it occurred to me this is NIKE right now. We are taking deliberate actions that we believe will restore the health and quality of our business, even when these actions create pressure in the near term. We are removing what is not working.

We are rebuilding parts of the foundation that needed to be rebuilt. And at the same time, we are continuing to innovate, to compete, and to create for the future. That takes conviction. It takes patience.

It takes belief. And it takes focus. Camp Nou is being rebuilt not for the next match. It is being rebuilt for the next era.

That is exactly how I think about the work we are doing at NIKE. I came back to help return this company to greatness and to build it the right way for the long term, to protect what has always made NIKE special, and to modernize it for a new generation of athletes and consumers. So while the work is not finished, the direction is clear. Our focus is clear.

And our comeback is within reach. And this fall, we look forward to sharing a fuller view of that path ahead at our Investor Day. With that, let us open it up for questions.

We will now begin the question and answer session. To ask a question, press star then the number one on your telephone keypad. We kindly ask that you please limit your initial question to one. Our first question will come from the line of Lorraine Hutchinson with Bank of America. Please go ahead.

Thanks. Good afternoon. The performance in EMEA seems to have decoupled from some of the early successes you have seen in North America. How do you diagnose the problems, and what is the strategy to fix it?

Well, Lorraine, as I highlighted, EMEA presented both progress and challenges in the quarter. And I think that as we have implemented the Win Now actions across that geography, we are seeing growth in performance. We are seeing Running up double digits, and we are really excited about the plans that we have got in place for the World Cup, as well as the way that we are setting up the marketplace for both upcoming product launches in both Running and in Training. This quarter, we highlighted that we did not see sell-in where we were hoping sell-in to be specifically on our Sportswear business, and it is really connected to a theme that we have been talking about for several quarters.

We have highlighted some of the macro pressures that we have been seeing in EMEA over the last few quarters, and specifically that marketplace has seen challenges in traffic and also a higher level of promotional activity. And so this quarter, as we saw sell-through trending below our expectations, we saw our partners start to be more promotional, and we also were more promotional to manage inventory across this large marketplace. And this quarter, we also experienced traffic disruption from the Middle East, and we also are taking that into consideration as we are thinking about where this business stands and also as we look forward.

So we have been aggressive, as I mentioned, with our teams pulling levers in order to keep this marketplace clean and healthy. Our closeout mix is at a really good level, and while we expect to exit the fourth quarter with elevated inventory in EMEA, we are confident, given the size of the issue and the way that our teams are responding, that we will be able to continue to work through the Win Now actions in this geography as well by the end of the calendar year.

And, Lorraine, the only thing just to add to that, we do have a new leader in place. I have tremendous confidence in Cesar Garcia. He is a 25-year NIKE veteran. He has deep and broad product and market experience, and he is a tremendous leader.

The team is really focused from a product perspective, and Matt touched on some of this, moving from being so Sportswear-reliant to also being really focused in on performance, where we have growth in Running, Training, and Football. So I like what they are doing there. They are now getting back to driving a more elevated and integrated market, and then they are focused on making sure we have the right assortments in those doors, elevating the presentation, and driving sell-through with our strategic partners. And so overall, I am really pleased with the actions that the team are taking.

Our next question will come from the line of Adrienne Eugenia Yih-Tennant with Barclays. Please go ahead.

Adrienne Eugenia Yih-Tennant: Thanks for the forward guidance, actually. That is my question. It is going to be so you are talking about the end of the calendar year, but your quarters kind of split the calendar year kind of in the middle. So I am wondering if we should be thinking about revenue, you said down low single digit for that horizon, with North America up and improving, which would suggest that Greater China is meaningfully negative, probably climbing from that negative 20. So just a little bit help there with the shaping and what is that? Is it February? The earnings being flattish would suggest, you know, 15% maybe haircut, you know, to where I mean, significantly more than where the Street is. So, again, is that flat for the fourth quarter on EPS through the February? And then should we think about the May of that year sort of having a big inflection? Sorry for all the kind of convoluted questioning, but thank you.

Yeah. Adrian, I am going to jump in first. I see Matt wrote down all the questions, so I think he is ready. But here is what I want to make certain that everyone here is on the call.

We are even more convinced now that the Win Now actions were and remain the right strategic moves. We have made meaningful progress improving the health, quality, and foundation of our business. We talked about that. And really, the areas that we said we were going to make the most progress, the ones that we knew made the most impact, are some proof points that the actions are working.

If just at a high level to go through the actions, we first said culture was number one. We have the teams galvanized around sport and growth. Product was the second one. We are driving the sport offense.

We just moved into sport offense in September. Spring 2027 will be the first quarter where we will have product flowing into the marketplace from the sport offense. And Running is a proof point this quarter. It is up double digits.

NIKE Football is also getting back to growth. We have innovation coming. We talked about MIND and AeroFit. The wholesale business is back to growth.

And we are paying it off in North America. So I am really pleased with those proof points that the Win Now actions are making an impact, and know that we are moving quickly against Greater China, Converse, and Sportswear. We have new leaders in place. We are creating thoughtful long-term strategies.

And we are making structural changes. And what I want to leave you with before I hand it over to Matt is that these are deliberate actions. And we are not just fixing. We are building, brand by brand, sport by sport, country by country, and partner by partner.

And I will acknowledge that parts of it are taking longer than I would like, but we believe in the direction. We are moving with urgency, and the foundation is getting stronger. So I feel great about that.

And, Adrian, on the specific guidance question, what I would say is that we have been providing 90 days of guidance for the last five quarters since Elliott returned, and we have been consistently asked for greater visibility as we had confidence in the trajectory of the business. And, you know, while this comeback has taken longer than we would like, with North America's continued momentum and a clear plan in place through the remainder of the calendar year, our approach to providing guidance for the calendar year is really about pulling up at this moment and providing transparency to the financial trajectory of the business over the next nine months.

So I think of it as it includes this quarter, and then it carries through over the next nine months. And we are lining that up with the timeline that we have set to complete the Win Now actions by the end of the calendar year. Specifically, your question about some of the elements of shaping, without getting into specifics of November versus December, what I would say is that we expect revenue to be down low single digits over this period. We do expect the momentum to continue in North America, and so we are planning for modest growth in North America, even as we continue to lap the value liquidation that we have been doing this year.

That is going to be offset by headwinds in Greater China, and that is partly related to what we have been talking about, which is continuing to reduce the sell-in so that we would meet full-price demand, and also some of the actions that we are continuing to take in the marketplace in order to be able to clean it up. But I think the important point is that we expect margins to inflect, and that is a big moment, I think, in Q2 for us, as we have been navigating through the costs associated with the Win Now actions and dealing with the newly implemented tariffs. I think our confidence in margins inflecting positively in Q2, while we are managing SG&A tightly, really sets the table for inflection in earnings as we go from there.

Our next will come from the line of Simeon Siegel with Guggenheim Securities. Please go ahead.

Thanks. Hey. Good afternoon, guys.

Hey, sir. In the spirit of all this information, which, again, thank you. I know you guys do not normally give this detail, but any color you can share on DTC gross margins or just any way to think about the health of that channel? I know I have gotten a lot of questions around wholesale growth versus DTC declines.

Just might be helpful to hear a little bit more about the quality of those DTC sales versus the reported declines, Elliott. And then, Matt, just could you quantify the severance booked into the operating overhead this quarter? The full $230 million? I am just trying to think through the change in operating overhead on a recurring basis, how you are thinking about operating overhead expenses next year as you further variabilize P&L?

Thanks, guys.

Yep. Thanks, Simeon. Let me jump in, and then, Matt, I will let you take the specifics around the DTC questions. But here is what I want to make sure that everybody on the call understands.

We had been servicing our consumers with a direct-to-consumer model, and now we are moving to serve consumers wherever, however they choose to shop with us. We want to make certain that we are managing our business across a balanced and integrated marketplace. That is the strength of NIKE, when we are able to have a portfolio of places that we serve to consumers. And we are making certain that we segment and differentiate the assortments across multiple channels.

NIKE Direct is certainly a part of that, but we are also making certain that we serve consumers in specialty sporting goods, athletic specialty, department stores, family footwear, and digital and physical. That is the power of NIKE, and I think we are doing a much better job of working directly with our partners, developing long-term plans, and making certain that we gain back shelf space and ultimately share. So again, yes, DTC is critically important to our success moving forward. I want to make sure you hear me say that.

But, also, I want to make certain that you hear that an integrated and balanced marketplace is also critically important.

And specifically to your question about the quality of the DTC business, what I would say, Simeon, is that North America is the geography where we saw the most improvement in the quality of the business in Direct, and specifically I am really talking about digital. We did, with our focus on sports, see strong results across our NIKE stores around the world, lining up against sport and getting behind key sport moments. But on the digital side in North America, we saw continued improvement in the gap between wholesale and Direct. And when we look at the quality of that business in North America, we continue to be encouraged.

I mentioned a couple things on the call, but we saw sequential growth throughout the quarter driven by strong launch—that is across both NIKE and Jordan. We saw growth in key sports on digital, and we saw continued improvement in average retail discounts in North America. We saw demand on the NIKE app grow in Q3 in North America, and, as I mentioned, we saw sell-through overall in the marketplace in North America in February inflect up, and it was the first time in two years that we saw positive growth in all channels. So that includes wholesale and across Direct.

And so we continue to be encouraged that as we are getting deeper into our Win Now actions, we are getting closer to balanced growth between wholesale and Direct in the North America marketplace. And that is the playbook that we intend to take, that we are taking, to Europe, to APLA, and to Greater China, and what we are focused on executing through the balance of the calendar year.

Our next question will come from the line of Michael Binetti with Evercore ISI. Please go ahead.

I guess just to clean up if the negative 2% to 4% in fourth quarter is reported or currency, and then I guess, bigger picture with revenues down 2% to 4% and North America growing modestly, China down 20%. You did not guide the EMEA in the fourth quarter, but it seems like triangulating somewhere close to down mid singles, down a bit, despite the World Cup. Maybe just the shape of the major puts and takes in EMEA in fourth quarter since the revenue rate changed so much in third quarter? And I guess the follow-up there is the margins in EMEA were surprisingly strong in third quarter despite the revenue decline.

Could you just comment there on maybe any color on whether those positive offsets continue?

Yeah. The comments that I made on EMEA in the third quarter definitely inform the way we are thinking about the fourth quarter. We expect to continue to see growth in the performance dimensions. We are incredibly excited about World Cup.

I mentioned that we have got strong double-digit growth in Running, and we are excited about upcoming product launches in both Training and Running. Training is the second biggest performance category, and it is super important to continue to build momentum as we continue to drive our Training business across all sports. The real change in the quarter was sell-through on the Sportswear side. And so our outlook reflects a modification that takes this into consideration in terms of our expectation of the Sportswear business in Q4 because we are managing the marketplace carefully.

We have also taken into consideration not only what we have seen in the Middle East as it relates to traffic, but also our expectations of the disruption of that in this marketplace based upon what we can see today. And so that is really the other factor that we have taken into consideration in this fourth quarter guidance. But we continue to be encouraged by the momentum in North America. We have got a strong order book for summer.

We are seeing positive signs in sell-through. We are not seeing a consumer reaction to what is going on in the Middle East at this point in time in North America. And so our teams are continuing to work hard to connect with consumers and to continue to rebuild back brand momentum across that geography and the rest of the geographies.

Our next question will come from the line of Brooke Roach with Goldman Sachs. Please go ahead.

Good afternoon, and thank you for taking our question. Elliott, Matt, was hoping to get your latest thoughts on the opportunity to stabilize the Sportswear business. How much additional reset activity is needed in the Classics franchise by geography? Are you seeing any green shoots in the North America Sportswear portfolio that gives you confidence that the strength in performance can translate to better momentum in Sportswear over time?

Thank you.

Yeah. Thanks, Brooke. Here is how I would think about it, and I said it in the prepared remarks, but we are definitely moving from defense to offense in both NIKE Sportswear and Jordan Streetwear. We have to think about both of those, especially as you think about North America.

Let me first start with where we prioritized, and we did prioritize our performance business. And we felt like we had to get performance products right because sport is what drives our authenticity. It is our important difference and distinction. It drives our best products and storytelling.

And, ultimately, sport is what creates a halo over the Sportswear and Streetwear businesses. And so we really got after the sport business through the and Running, a complete offense, making sure that we had innovative product driven by athlete insights. And now, as you are hearing from Matt and me, we are paying it off across the integrated marketplace. So it is working on the sport side.

In terms of how we are doing on the Sportswear and Streetwear side, here is what I would say. And I did use the specific, where we intentionally pulled back, which created about a five-point headwind this quarter, of removing unhealthy inventory from those Classics. And what I would say is that the Air Force 1 and the AJ 1, they stabilized this quarter. And so we are seeing month-to-month improvement in full-price realization in those two franchises.

And I also want to make sure that you hear me say that we see that as a positive because we believe these icons will always be staples for the consumer. We are still stabilizing the Dunks. We have a little bit of work to do there. But at the same time, the green shoots, as you call them, we are starting to see the team create some buzz around our business this quarter.

We had some really good and tremendous launches: AJ 11 Gamma, the AJ 5 Wolf Grey, the NIKE Air Max 95, and all of them had a high full-price realization and really strong sell-through. So the Sportswear team is moving to playing offense, and what you will see from us is that team taking insights from the consumers that they serve and focusing on creation around comfort, innovation, and, yes, we will continue to leverage our unmatched vault. And so I am really pleased with the progress that the Sportswear and the Streetwear teams are making. But we still have work to do.

And I call that out that we still have work to do, but I am confident in the actions that we are taking and pleased with the way the consumer is responding.

Our next question will come from the line of Brian William Nagel with Oppenheimer & Co. Please go ahead.

Hey, guys. Thanks for taking my questions. So, Elliott, the question I wanted to ask, I mean, you have mentioned several times in your comments that you are heading in the right direction, but the process is taking longer than you initially expected. So the question is, as you look at the reasons for that, is it more internal, or is it more external?

The environment in the different geographies or whatever has proven more challenging for the turnaround efforts here.

Brian, I think the easy answer for me to say is a little bit of both. Here is what I would say. The starting point for each geo or each country was at a different place. And, by the way, each marketplace has a different structure as well.

And so we had to make certain that we truly understood where each country and each marketplace was in terms of their performance across the entire integrated marketplace—again, NIKE Direct all the way through the different channels. And so I think the easiest way to think about it is, the comeback is substantial, and, at our size and scale, building for the future takes time. And it has taken longer than I would like. But what I would tell you is we got our teams reorganized from a product perspective as well in September, and Spring 2027 will be the first time we see the fruits of those teams working together.

But in the end, I am pleased with where we are headed. And I think everybody, when I came into this role, said, “Hey, it is going to take two years.” And that is what we are tracking right now. So a little bit of both, Brian. We do have some external factors that we are having to deal with while we are in a major comeback.

But that is no excuse. We are controlling what we can control. We are getting our teams lined up internally around product and the consumer and storytelling. And then we are getting our country teams lined up around driving a more integrated and elevated marketplace.

And, ultimately, that is what is going to pay dividends for us and build the foundation for future growth.

Our final question will come from the line of Matthew Robert Boss with JPMorgan. Please go ahead.

Great. Thanks. So, Elliott, if we take a step back, just update us on health of the global Sportswear backdrop, or where does your outlook for the industry stand today relative to when you took the helm? And then, Matt, on low- to mid-single-digit constant currency revenue declines for the back half of the year, is there a way to parse out self-inflicted headwinds or maybe where you see underlying demand exiting this fiscal year, and what have you embedded for overall sell-through rates through the balance of the calendar year just relative to the pressure that you cited that you have experienced to date?

Matthew, let me take—so I think the easiest answer on Sportswear is that it will remain a very large part of the overall industry, and it will be critical to our success moving forward. So we are taking a streets-up approach to this and making certain that we help this big, giant business feel more local. And, again, it takes time to seed, ignite, and scale product over time, but returning to a healthy Sportswear business is essential and vital to our comeback because it will continue to be a critically important part of the overall market and overall part of our growth. So, with that said, I am incredibly positive on the athletic industry overall, not just in Sportswear, and we see it as a tremendous opportunity for us to continue to drive growth in an expanding market.

And then, Matt, to your question on sell-through assumptions—maybe let me hit revenue first. For the first half of next year, I think it is safe to look to the range we provided for Q4 as a guide for what we are expecting for revenue for those last two quarters. And I think it is really highlighted by the trends that we have talked about. It is North America continuing to sustain momentum.

We expect to see more balanced growth across channels. Given where inventory is in the marketplace, we expect to continue to see improvement in underlying profitability in that geography, and the top line will be tempered a little bit, like we have been talking about, because we are anniversarying quite a bit of off-price liquidation in the prior year. But it is a healthier business. It is a more profitable business.

And it is a sustainably growing business across all channels of the marketplace. As you go outside the U.S., I think that we have been clear that we believe that we can complete the Win Now actions in EMEA and APLA by the end of this calendar year. That is how you should read what we are communicating. I think that will continue to be us going deeper on cleaning up the marketplace, especially digital.

And quarter by quarter, we are planning for improvements in sell-through. As it relates to Greater China, we are managing sell-in. And by managing sell-in, we expect to continue the trend, like we saw this quarter, of sequential improvement in sell-through rates. And so we are managing supply in order to be able to continue to shift the mix of inventory in that marketplace to be more full price and more healthy.

And that is why I gave the commentary around, while the actions we are taking will create a headwind to revenue in Greater China, we do expect to see profitability bottom faster because it is going to be a healthier, more profitable business as we set that foundation for much more balanced growth as we go forward in China.

And that will conclude the question and answer session and our call today. Thank you all for joining. You may now disconnect.