The Nike Turnaround Is Real. It's Just Not Happening Everywhere.
Running is thriving. Converse is dying. China is something else entirely.
If you read yesterday’s piece about what’s happening with lifestyle sneaker demand in Europe, you already have more context for today’s Nike Q3 numbers than most of the financial press covering them. I’d encourage you to go back and read it if you haven’t... because the story of what Nike reported this afternoon isn’t really about one quarter. It’s about a company in the middle of a genuine structural reset, moving at completely different speeds depending on where you look.
Nike reported Q3 revenues of $11.3 billion, flat compared to last year. Wholesale grew 5 percent. Nike Direct fell 4 percent, with digital down 9 percent and owned stores down 5 percent. Earnings per share (EPS) came in at $0.35, down 35 percent from last year, though that comparison is skewed by a one-time tax benefit Nike received last year that won't repeat, so the decline looks scarier than it is.
The headline numbers will look mediocre to most observers, but they’re not the real story.
What the Numbers Actually Say
Let me break this down the way Elliott Hill has been framing it since he took over... by brand, by geography, by what’s working and what isn’t.
That continued Nike Direct decline is intentional. Nike has been deliberately pulling back from promotional digital activity to rebuild its premium positioning online. Fewer deals. Fewer discount days. Less revenue in the short term, healthier brand in the medium term.
The margin story is the one worth paying attention to. Gross margin came in at 40.2 percent, down slightly from last year. That number looks worse than it is. Tariffs are adding a fierce headwind (that wasn’t there two years ago) in the form of roughly $1.5 billion in annualized product costs to Nike’s books. Strip that out and Nike’s underlying margins actually expanded in Q3. That signals the cleanup actions are working where it started.
Inventory is down 1 percent. For context, Nike has been carrying elevated inventory since the pandemic-era demand surge and subsequent correction. A declining inventory position... especially with units down more than the dollar value... means the marketplace cleanup is working, not just accounting.
North America Is the Blueprint
North America grew 3 percent in Q3, with wholesale up 11 percent. It was the first quarter in two years where Nike saw positive growth in every single channel simultaneously... wholesale, Nike stores, and digital all in the green at the same time. That’s a meaningful milestone and Hill called it out specifically on the call.
The underlying story continues to be running. Running was up over 20 percent for the third consecutive quarter, gaining market share, growing in every channel simultaneously. The Vomero, the Structure 26, the Pegasus. Football grew double digits. Basketball was up high single digits.
What’s still a headwind: Sportswear. The intentional removal of unhealthy Classics inventory created what Friend called a “roughly five-point headwind” to reported results this quarter. That’s deliberate. The Air Force 1 and Air Jordan 1 are stabilizing month over month. The Dunk still has work to do. But the launches that did happen... the AJ11 Gamma, AJ5 Wolf Grey, Air Max 95... drove strong full-price sell-through. As I wrote earlier this month, Nike’s best marketing right now isn’t ads. It’s finding the people who were there before the hype and earning their trust back. The North America numbers suggest that’s working.
Hill has been using North America as the proof of concept for his “sport offense,” aka, the restructuring of Nike’s teams around specific sports rather than demographics. The early results validate the approach. The question is whether it translates to geographies where the conditions are different.
China Is a Longer Road Than Anyone Wants to Admit
On the Q2 call, Hill said something that sootd out to me. Talking about China, he said: “The reality is we’ve become a lifestyle brand competing on price in China.”
That’s an extraordinary admission for a Nike CEO to make on an earnings call. And it explains everything about why China continues to be the longest timeline in the turnaround.
Nike’s China business declined 16 percent in Q2 and 10 percent in Q3. The problem isn’t product. Nike has genuinely innovative product. The problem is a self-reinforcing cycle: soft demand led to consistent promotions, consistent promotions eroded premium positioning, eroded positioning created softer demand. The cycle has been running long enough that it’s now structural rather than situational.
A Brief History of Nike’s Unbelievable Technologies
I’ve been getting texts about the Nike Mind for almost a week now. People I haven’t talked to in months suddenly reaching out with “Hey, what do you think of these?” or “I got a pair, you gotta try them.”
One thing to note in the China numbers… Nike's China profitability was actually up 11 percent even as revenue fell. Seems impossible, but that's because Nike is deliberately shipping less product to wholesale partners in order to clean the marketplace, rather than chasing top-line numbers that would require discounting to achieve. The revenue decline is intentional. The improving profitability is the actual signal worth watching.
Hill has restructured leadership so all geographies report directly to him. He's personally overseeing the China reset alongside Cathy Sparks, a 25-year Nike veteran who took over as Greater China GM in January after longtime leader Angela Dong departed the company. Hill said of the appointment: "Greater China is at a critical moment that calls for a leader who knows how to rebuild momentum, earn trust, and reconnect sport and culture to the marketplace." He's been clear that China requires "a fresh perspective, new approach, and new capabilities." What he hasn't given is a timeline, because there isn't a credible one to give. China is expected to be down approximately 20 percent in Q4 as the marketplace cleanup accelerates.
[Editor’s note: An earlier version of this piece incorrectly stated Angela Dong remained in her role. Nike announced in January that Cathy Sparks, a 25-year Nike veteran, would take over as Greater China GM, with Dong departing the company effective March 31.]
For anyone whose business touches China... brands, retailers, distributors... the hard truth is that Nike’s China premium positioning rebuild is a multi-year project, not a multi-quarter one.
Converse Is the Story Nobody Is Talking About
Converse was down 30 percent in Q2. In Q3 it got worse: down 35 percent, with declines across every territory.
I keep waiting for someone in the financial press to treat this as more than a footnote. The Chuck Taylor is one of the most culturally significant sneakers ever made. It’s been punk. It’s been hip-hop. It’s been basketball. It’s been art school. It’s a shoe that has existed meaningfully across more subcultures than almost any product in the history of footwear, precisely because it predates the concept of a trend cycle.
And Converse… the brand, the whole thing… is down 35 percent year over year.
Converse got caught in Nike’s broader DTC (direct-to-consumer) foccused strategy that cut off the independent boutiques and skate shops that were the brand’s actual cultural home. Canvas footwear has also been normalizing after a period of outsized growth. Vans is struggling too. The category headwind is a big issue here.
But what concerns me more than the numbers is the absence of a clear articulated vision. "Under new leadership and in a reset" is not a creative direction. The Chuck Taylor doesn't need to be reinvented. Shai's signature shoe is a genuine bright spot... but one athlete's momentum doesn't fix a brand that's lost its sense of direction. It needs leadership who understands why the Converse catalog mattered and can create the conditions for it to matter again. It's possible that being the stepchild brand, based in Boston rather than Beaverton, is creating a people and culture problem... and those take longer to fix than inventory does.
What I said about past greatness not buying future passes applies to brands, too.
EMEA and the European Signal
Yesterday I wrote about Sport 2000’s data showing lifestyle sneaker demand dropping seven points in Europe in a single year. Nike’s Q3 EMEA results just confirmed that signal loudly.
EMEA (Europe, Middle East, Africa) was down 7 percent in Q3... a significant deterioration from the 1 percent decline in Q2. Wholesale fell 4 percent. Nike stores down 20 percent. Sell-through on sportswear came in below expectations. Partners got more promotional to manage inventory. Nike Digital followed suit at the end of the season, resulting in higher markdowns and a higher mix of discounted product moving through. Nike now expects to exit Q4 with elevated inventory in EMEA... the opposite of the cleanup story in North America.
There’s also a new variable: disruption in the Middle East is affecting traffic in that part of the geography and being factored into the outlook.
The one piece of genuine good news in EMEA… running grew double digits. The sport offense is working in performance. The lifestyle side is where the European macro environment is applying pressure that no internal restructuring can fully offset. There’s also a new leader in place... César García, a 25-year Nike veteran... which at minimum signals the seriousness with which Hill is treating the EMEA challenge.
The Innovation Story That Got Lost in the Numbers
Lost in the geography breakdown is something worth pausing on. Nike Mind... the new performance footwear platform with over 150 patents filed globally... sold out in every geography this quarter. Two million consumers signed up for Notify Me on nike.com. Nike is doubling production for the next two seasons. That doesn’t happen for a brand that’s lost its product credibility.
Alongside that: Aero-FIT, the new elite apparel cooling platform, launches in football kits for the World Cup this summer and expands into running in the fall. The innovation pipeline that Hill has been promising is starting to actually arrive in market.
There’s also a timing point worth understanding. Hill mentioned on the call that Spring 2027 will be the first season where product developed fully within the new sport offense team structure reaches retail. The numbers we’re seeing now are still the old product mix flowing through. The real test of whether the sport offense works comes in the next six to twelve months.
The Tariff Problem Hasn’t Gone Away
The margin improvement in Q3, against a backdrop of roughly $1.5 billion in annualized tariff costs, means the business is absorbing that structural pressure better than it did in Q2. That’s progress. But it isn’t going away.
Hill has been explicit that returning to strong operating margins is a top priority. Chief Financial Officer Matt Friend has outlined the path: more product selling at full price, wholesale growth lowering the cost of getting product to consumers, tighter control of operating costs. Those are the right levers. None of them work fast enough to fully offset the tariff headwind without price increases, accepting thinner margins, or finding new places to manufacture that take years to build. Friend did say he expects margins to start improving in early 2027... the first period where tariffs stop being a drag on the numbers compared to last year.
For buyers and brand partners building plans right now, the promotional patterns of 2022-2024 are not coming back on a near-term timeline. Nike is deliberately moving away from them. That affects how you merchandise, how you price adjacent product, and how you think about shelf space if and when Nike pulls back further from certain categories.
What I’m Keeping A Close Eye On
The “middle innings” framing Elliott Hill has been using is more precise than it sounds. Here’s what I mean.
Running is in the late innings of the reset... it’s already growing, taking share, building a pipeline. North America is in the middle innings... the cleanup is largely done, the growth is there, the question is sustainability. EMEA is in the early-to-middle innings depending on the category. Jordan is in the early-to-middle innings of figuring out its identity beyond streetwear. Converse is in the first inning of what feels like a very long game.
And China... China might still be in warmups.
The brands and retailers who understand which inning each part of Nike’s business is in, and plan accordingly, are the ones who will be best positioned as this plays out. The ones who are waiting for Nike to return to its 2019 operating model are going to be waiting a long time.
Hill closed the call with an image from his visit to Barcelona. Camp Nou is being rebuilt... scaffolding everywhere, entire sections unfinished, cranes in the corners... while the players still take the pitch every match week. He said Nike is doing the same thing: rebuilding the foundation while still competing. The fall Investor Day at the newly renamed Philip H. Knight Campus in Beaverton is where he has to show the full blueprint publicly for the first time. The Camp Nou crowd is still showing up. Whether they remain patient through the construction depends on what that blueprint looks like.
Nike is not broken. The Q3 numbers confirm that. Revenue held, gross margin is stabilizing excluding tariffs, inventory is cleaning up, running is winning. The foundation Hill has been describing for the past year is genuinely being laid.
It’s just not done yet.
I’m Nick Engvall, and I’ve been writing about sneakers and culture for two decades, from building Eastbay’s first blog to being employee #9 at StockX. I run Sneaker History (website and podcast) and write The Sneaker Newsletter... the people, the stories, and the business of sneakers. If you want the deeper stuff... the industry analysis, the “From the Vault” stories from inside the business... become a paid subscriber.
Converse should have more opportunities to become a technical brand, but its business model would need a complete overhaul. It’s a low probability, but it would strengthen Nike’s lifestyle approach.
I just posted DCF valuation on my page. Shares does not look undervalued.