Nike (NKE) reported better-than-expected earnings in its fiscal third quarter, showing progress in its uneven turnaround under CEO Elliott Hill, but recovery efforts in China dragged on the quarter.
The company reported adjusted earnings per share of $0.35, beating Wall Street analyst estimates of $0.31, according to Bloomberg data. Revenue of $11.3 billion was flat year over year but higher than the $11.34 billion analysts expected. Revenue fell 3% over the previous year when adjusted for currency impacts.
Nike stock fell more than 2% in after-hours trading on Wednesday as investors wanted more from the quarter.
“They’re in the middle of a turnaround,” CFRA analyst Zachary Warring said. “They’re working on a lot of different things, which is why I think you’ve seen a muted reaction. There’s just not much to get excited about.”
Revenue for its direct-to-consumer business, Nike Direct, decreased 4% to $4.5 billion, in line with estimates. The company previously said it expects to see growth in the segment this fiscal year as it returns its focus to wholesale operations.
Wholesale revenue increased 5% to $6.5 billion. Wall Street analysts had forecast a drop of roughly 3% to $6.4 billion.
The namesake Nike brand grew sales by 1% to $11 billion, surpassing expectations for a 0.5% increase from a year ago. Sales at Converse, which Hill said in a previous quarter is in the “early stages of a global market reset,” were far weaker than expected, dropping 35% to $264 million. The Street forecast a roughly 26% decline to $300 million.
Revenue in greater China declined 11% for the quarter, dragged lower by a 27% decline in equipment sales, followed by footwear and apparel.
Higher tariffs in North America created a 130 basis point headwind on gross margins, which came in at 40.2%, just above the 39.8% the Street was looking for.
“This quarter we took meaningful actions to improve the health and quality of our business,” said Nike’s Hill, who took on the CEO position in 2024. “The pace of progress is different across the portfolio and the areas we prioritized first continue to drive momentum. The work is not finished, but the direction is clear.”
Correction: A previous version of this article misspelled Zachary Warring’s name. We regret the error.
Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.