Nike Inc Earnings - Q3 2025 Analysis & Highlights
Key Takeaways
NIKE, Inc.'s Q2 Fiscal Year 2026 earnings call highlighted the company's progress in its turnaround, emphasizing the Sport Offense strategy, geographical performance disparities, and margin pressures due to tariffs and marketplace cleanup. The call also detailed financial results, segment performance, and forward-looking guidance, with a focus on returning to sustainable, profitable growth.
Key Financial Results
Revenue increased by 1% on a reported basis and was flat on a currency-neutral basis.
Excluding the reduction of classics franchises, currency-neutral revenue grew 6%.
NIKE Direct sales decreased by 9%, with NIKE Digital declining by 14% and NIKE stores down by 3%.
Wholesale grew by 8%.
Gross margins decreased by 300 basis points to 40.6%, primarily due to increased product costs from higher tariffs in North America and inventory obsolescence in Greater China.
SG&A expenses increased by 1%, driven by higher brand marketing expenses, partially offset by lower operating overhead.
Earnings per share (EPS) was $0.53.
Inventory decreased by 3% versus the prior year, with units down high-single digits.
Business Segment Results
North America: Revenue grew by 9%, with wholesale up 24%. NIKE Direct declined 10%, with NIKE Digital down 16%. EBIT declined 8%.
EMEA: Revenue decreased by 1%. NIKE Direct declined 3%, with NIKE Digital down 2%. Wholesale was flat. EBIT declined 12%.
Greater China: Revenue declined by 16%, with NIKE Direct down 18% and wholesale down 15%. EBIT declined 49%.
APLA: Revenue decreased by 4%. NIKE Direct declined 5%, with NIKE Digital down 10%. Wholesale was down 3%. EBIT declined 15%.
Capital Allocation
The document does not contain specific details regarding capital allocation, such as dividends, share repurchases, capital expenditures, or debt payments.
Industry Trends and Dynamics
The company is focused on adapting to the unique mono-brand footprint and digital-first marketplace in China.
There is a discussion of the importance of staying connected to what's happening on the ground and adapting the approach to fit the specific market.
Competitive Landscape
The company aims to differentiate its multi-brand, multi-sport, and multi-price point portfolio through strategic partnerships.
NIKE is focused on regaining its premium position and market share in China by emphasizing innovation and inspiration through sport.
Macroeconomic Environment
The company is navigating headwinds from actions taken to reposition the business.
The company is navigating new structural headwinds from $1.5 billion of annualized incremental product costs due to higher US tariffs.
Growth Opportunities and Strategies
The Sport Offense is the accelerator of the Win Now actions, driving athlete-centered innovation across countries and channels.
Focus on sport by brand is the engine of growth, amplified by the global marketplace.
Diversifying the product portfolio across footwear, apparel, and equipment, with a focus on performance business.
Elevating the marketplace experience in key NIKE stores and nike.com.
Deepening consumer connections and strengthening partner relationships.
Realigning teams and leadership to accelerate Win Now actions.
Focusing on key cities and countries to drive profitable and sustainable revenue in both wholesale and direct channels.
The company is focused on improving the profitability and operating efficiency of its business and realigning costs while also investing to reignite growth.
Financial Guidance and Outlook
Q3 revenues are expected to be down low-single digits, with modest growth in North America.
Performance in Greater China and Converse is expected to be similar to Q2.
There is an expected 3 point benefit from foreign exchange.
Q3 gross margins are expected to be down approximately 175 to 225 basis points.
Excluding the 315 basis point impact of higher gross product costs related to new tariffs, gross margin expansion would be positive in the third quarter.
Q3 SG&A dollars are expected to be up low-single digits, due to higher demand creation and investments in the Sport Offense.
