What risks could impact NKE's future earnings?

Nike's future earnings could be impacted by several risks, including:

1. **Sales Decline Due to Tariffs and Consumer Confidence**: Nike has warned of a significant sales decline in the current quarter due to new tariffs, declining consumer confidence, and slower-than-expected business recovery. The company anticipates a sales drop of around 15% in the fourth fiscal quarter ending in May.
2. **Revenue Decline and Margin Pressure**: Nike's third-quarter earnings report revealed a 9% revenue contraction and a reduction in gross margins due to inventory markdowns and intensified efforts to clear excess inventory and outdated styles. The company's gross margin suffered a reduction of 330 basis points, settling at 41.5%, primarily due to inventory markdowns. Although inventory levels decreased by 2% to $7.54 billion, this reduction was slower than the revenue decline, indicating a potential inventory overstock issue.
3. **Geopolitical Tensions and Intensifying Competitive Landscape**: Nike's third-quarter results for fiscal 2025 showed a staggering 17% decline in sales from Greater China, which was once a promising growth engine. This downturn is attributed to geopolitical tensions and rising competition from local brands. The company's largest market, North America, also experienced a 4% sales drop, which could have a lasting impact on future earnings.
4. **Strategic Pivot and Innovation**: Nike is actively working on diversifying its product portfolio and reigniting brand momentum through strategic investments in brand and sports marketing. The company has successfully launched new innovative products, but elevated inventory levels across all geographies are expected to take several quarters to normalize. The company's aggressive liquidation strategy and shift in focus back to performance-driven footwear and apparel may come with risks such as margin pressure from markdowns and high promotional activity.
5. **Macro Economic Factors**: Macroeconomic factors like inflation and rising interest rates have curbed discretionary spending, which has impacted Nike's lifestyle product sales and digital revenues. These factors could continue to affect consumer spending and, consequently, Nike's future earnings.

In conclusion, Nike's future earnings are subject to various risks, including sales decline due to tariffs and consumer confidence, revenue decline and margin pressure, geopolitical tensions and intensifying competitive landscape, strategic pivot and innovation, and macro economic factors. These risks could lead to a prolonged period of slower revenue growth and margin pressure for the company.