Yahoo Finance

Nike third quarter earnings coming across moments ago. We got the whole team with us to break it down. Joining us, Yahoo! Finances, Brad Smith, and Brooke DiPalma. Brooke, first, give us the numbers here.

So adjusted earnings per share beat expectations. We also saw revenue beat expectations. To take a closer look in those numbers, adjusted earnings coming in at 54 cents, revenue coming in at 11.27 billion dollars. That was compared to what Wall Street had expected of 11.03 billion. Now, the Nike brand, that key segment of the business, did also beat expectations when it comes to revenue coming in at 10.89 billion dollars, compared to what Wall Street had expected of 10.6. Now these were pretty lowly expectations going into this report. Many analysts telling me on the phone today that Nike is getting a pass here for this quarter and two after this, in the midst of what is a turnaround under new CEO, Elliot Hill. Analysts and investors really looking for long-term strategic moves that Hill will make. Now, this also comes at a time when consumers are very choosy. They have to be convinced to buy with newness and innovation. We also have seen other competitors like On Holdings, Skechers, and Hoka also come into the picture during this turnaround plan at Nike.

Yeah. And Brad, you had a chance to talk to some folks at the company.

Yeah, some of the sources at Nike and ultimately just additional context around how you're going to hear, I think, the executives continue over the next few months in this transitory period for the product portfolio, for their wholesale relationships, really try to tell the story and sell the story, not just internally among folks that work at Nike, but also to some of those wholesale partners. And one of the huge things that I would be watching more for is something that we've already heard for the company, this Win Now program where it's really five actions that they're trying to take to the mindset of their customers, both the wholesale partners as well as some of the customers like you and I, Josh, going into store buying up all the most recent Jordans here on the day. Uh, but ultimately, igniting their winning culture, shaping their brand for distinction, accelerating a complete product portfolio, elevating and growing marketplace, plus winning on the ground with consumers. And I know we're going to talk about one of those key areas where they do need to win on the ground regionally. But if we think about the product portfolio here, just specifically, there was a lot of talk about how they had leaned too far into Dunks, how they had gone and looked at the retro Jordan brand and tried to figure out, okay, where can we make sure that we are milking that for all of the value that it potentially has. And there were some creative launches that certainly came forward, but now there's a larger question of how sustainable longer term that was, especially as analysts, who you and I have spoken to as well, are talking about, well, where's the newness? Where's the innovation that's really going to drive a lot more of that fanfare for the brand itself?

And there's so much going on with Nike, right? When we think about sort of the global brand and Brooke, I know you've sort of been tracking what's going on with Nike and their business in China. Their adjusted EBITDA coming in a little bit lower than expected in that region right now, but what's sort of the story with Nike and their China businesses?

Yeah, analysts telling me today that despite the, the thinking around tariffs taking a hit on their China business, it actually has reduced their exposure to China since Trump took office back in 2016. If you take a closer look, their footwear exposure, as far as manufacturing goes in China, has been reduced from 29% to 18%. Apparel business also down from 26% down to 16% in the latest year. But their China business, lots of work needs to be done in order to continue to, uh, convince that consumer to buy as well. We know that we saw on this report their business sales over there, Wall Street had expected them to drop roughly 9%, they dropped roughly 15%. So that was certainly way more than Wall Street had expected.

Yeah, no, that's a great point. And one of the huge things that we have to remember about China too is Elliot Hill, the new CEO who is a, of course, boomerang for the company, he's had a lot of experience operating and really revving back up their China business. 2014-2015, that was one of the main tasks that was on his desk. And ultimately what we saw back then was a period of time where there was more globalization. It's a far different period that they're operating through now. A lot of that consumer mind share, especially localized both US and in China has moved towards some of the more homegrown options. And so with that in mind, it's going to come back to how they're able to sell further into that region, which products are able to move through wholesale partners, and what price too, because this is a company that also has talked about in the past, wanting to make sure that much of their 65% of their inventory is selling at full price here. And so as you're working with those wholesale partners, they want to make sure that you're also not undercutting them and running massive promotions. And that's actually what we saw in the recent quarter, too. They cut back on some of those promotions. Anybody who was on the platform or on the website or on the Sneakers app, probably saw, probably saw sales, but less of the sales. That's what I was experiencing. I was like, where are the discounts? I need them here. I don't have as much to spend. And so that is something that we could see potentially going forward from here as well.

Meanwhile, this makes me wonder, what's the hot sneaker brand in China right now?

Well, Anta is doing really well. Um, so, so Anta, so Kyrie Irving, of course, ex-Nike athlete, is working with Anta, and he's been coming out with some pretty good shoes.

Is Anta China based?

Anta, I believe the, yes, I believe China based, but also one of the other massive things around them is they've now gotten into storefronts here in the US as well.

We have Hoka, we have On, we have Adidas, what, what's, now we have this brand.

Correct me in real time if I'm wrong.

They look kind of cool. I don't know where they're based. Who are they?

All right. Thanks, guys. Really appreciate the team coverage. That was great.