Nike Inc Earnings - Q2 2025 Analysis & Highlights
Key Takeaways
NIKE, Inc.'s Q1 2026 earnings call highlighted the company's progress driven by "Win Now" actions, particularly in running, North America, and wholesale, and the implementation of a new "Sport Offense" organizational structure. The call also addressed challenges in Sportswear, Greater China, and NIKE Direct, along with the impact of new tariffs.
Key Financial Results
Revenue increased 1% on a reported basis but decreased 1% on a currency-neutral basis.
NIKE Direct sales decreased 5%, with NIKE Digital declining 12% and NIKE stores down 1%.
Wholesale revenue increased 5%.
Gross margins decreased 320 basis points to 42.2%, due to higher wholesale discounts, higher discounts in NIKE factory stores, increased product costs including new tariffs and channel mix headwinds.
SG&A decreased 1% driven by lower brand marketing expense, partially offset by higher sports marketing expense.
Earnings per share was $0.49.
Inventory decreased 2% versus the prior year.
Business Segment Results
North America: Revenue increased 4%, with NIKE Direct declining 3% (NIKE Digital down 10%, NIKE stores flat) and Wholesale growing 11%. EBIT declined 7%. Running, Training, and Basketball delivered double-digit growth.
EMEA: Revenue increased 1%, with NIKE Direct declining 6% (NIKE Digital down 13%, NIKE stores up 1%) and Wholesale growing 4%. EBIT declined 7%. Performance business continued to build momentum, driven by double-digit growth in Running and low single-digit growth in Global Football and Training footwear.
Greater China: Revenue declined 10%, with NIKE Direct declining 12% (NIKE Digital down 27%, NIKE stores down 4%) and Wholesale declining 9%. EBIT declined 25%. Running grew high-single-digits.
APLA: Revenue increased 1%, with NIKE Direct declining 6% (NIKE Digital down 8%, NIKE stores down 5%) and Wholesale growing 6%. EBIT declined 13%. Performance Dimensions delivered strong growth, led by double-digit growth in Running and high-single-digit growth in training.
Capital Allocation
No specific details on capital allocation (dividends, share repurchases, capital expenditures, or debt payments) were provided in the prepared remarks.
Industry Trends and Dynamics
Increased promotional activity across the industry, especially in EMEA.
Cautious consumer behavior is impacting the business.
Running is a bright spot, with strong consumer response to new innovations.
Structural challenges in the Greater China marketplace.
Competitive Landscape
NIKE's advantage lies in serving athletes across sports with three distinct brands in retail channels at every price point.
The company aims to create greater brand distinction at retail.
Macroeconomic Environment
Tariff uncertainty is a concern.
New reciprocal tariff rates have increased, resulting in an estimated $1.5 billion gross incremental cost to NIKE on an annualized basis.
The net headwind in fiscal 2026 is expected to increase from approximately 75 basis points to 120 basis points to gross margin due to tariffs.
Growth Opportunities and Strategies
Sport Offense: Aligning NIKE, Jordan, and Converse into more nimble, focused teams by sport to gain sharper insights, fuel innovation, and connect with communities.
Running: Leveraging insights to redesign shoes and integrate innovation platforms.
Global Football: Preparing for the 2026 World Cup with new apparel innovation and streetwear collections.
NIKE ACG: Investing in NIKE ACG to address the outdoor activity market.
Partnerships: Partnering with SKIMS to create performance training products.
Elevating the Marketplace: Giving more consumers access to the brand in more premium environments.
Greater China: Developing consistent plans across all sports and refreshing retail environments.
NIKE Digital: Finding the right assortment and marketing mix to bring consumers back to the digital ecosystem.
Financial Guidance and Outlook
Q2 revenues are expected to be down low-single-digits, including 1 point of benefit from foreign exchange.
Q2 gross margins are expected to be down approximately 300 to 375 basis points, including a net headwind of 175 basis points from the new incremental tariffs.
Q2 SG&A dollars are expected to be up high-single-digits.
The tax rate for Q2 and the full year is expected to be in the low-20% range.
Wholesale revenue is expected to return to modest growth for fiscal 2026.
NIKE Direct is not expected to return to growth for fiscal 2026.
Revenue and gross margin headwinds from Greater China and Converse are expected to continue throughout fiscal 2026.
