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    NKE
    Earnings call· Aug 2025(Q1 FY26)

    NIKE, Inc. NKE

    Sep 30, 2025 Source

    Executive summary

    NIKE, Inc. Q1 FY26 — Progress in Running, North America, and Wholesale Amidst Tariff Headwinds

    NIKE, Inc. reported Q1 FY26 results showing tangible progress from its "Win Now" actions, particularly in running, North America, and wholesale channels. The company is implementing a new "Sport Offense" organizational structure to drive innovation and consumer connectivity. Despite these gains, challenges persist in Sportswear, Greater China, and NIKE Direct, compounded by significant tariff headwinds and a cautious consumer environment, indicating that the journey back to consistent, profitable growth will not be linear.

    Highlights

    5

    • Nike Running business grew over 20% this quarter, driven by new innovations.

    • North America Q1 revenue grew 4%, with wholesale up 11% and momentum building in key sports.

    • Company-wide wholesale revenue grew 5%, and the spring order book is up year-over-year.

    • Inventory decreased 2% versus the prior year, making steady progress towards a healthy marketplace.

    • Successful launch of the NIKE Brand store on Amazon, driving stronger engagement and sales than anticipated.

    Concerns

    5

    • Gross margins declined 320 basis points to 42.2% due to higher discounts, increased product costs, new tariffs, and channel mix headwinds.

    • NIKE Direct revenue declined 5%, with NIKE Digital down 12% and organic traffic continuing to decline double digits.

    • Greater China revenue declined 10% and EBIT declined 25%, facing structural challenges and underperforming seasonal sell-through.

    • New reciprocal tariffs are estimated to result in a gross incremental cost of approximately $1.5 billion annually, increasing the net headwind to FY26 gross margin to 120 basis points.

    • Sportswear business continues to decline, and classic footwear franchises (Air Force 1, Air Jordan 1, Dunk, Chuck Taylor) require aggressive management.

    Guidance & targets

    10
    CategoryTargetConfidence
    Q2 Revenue Growth
    down low single digits
    high materiality
    High
    Q2 Gross Margin Decline
    down approximately 300 to 375 basis points
    high materiality
    High
    Q2 SG&A Dollars Growth
    up high single digits
    medium materiality
    High
    Q2 Other Expense, Net of Interest Income
    $10 million to $20 million
    low materiality
    High
    Q2 and Full-Year Tax Rate
    low 20% range
    medium materiality
    High
    FY26 Wholesale Revenue Growth
    modest growth
    high materiality
    Medium
    FY26 NIKE Direct Revenue Growth
    not expected to return to growth
    high materiality
    Medium
    FY26 Greater China Revenue and Gross Margin
    headwinds to continue
    high materiality
    Medium
    FY26 Converse Revenue and Gross Margin
    headwinds to continue
    high materiality
    Medium
    FY26 SG&A Growth
    low single digits
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    North America
    Building momentum through sustained brand activity and marketplace transformation. Wholesale growth partially due to shipment timing and higher liquidation volume to value channels. Progress in repositioning NIKE Digital by reducing promo days and markdown rates.
    NIKE Direct growth: -3%NIKE Digital growth: -10%NIKE Stores growth: flatWholesale growth: 11%EBIT growth: -7%Running growth: double-digitTraining growth: double-digitBasketball growth: double-digitSportswear growth: positiveClassic footwear franchises decline: 30%Inventory units: declined YoYInventory dollars: flat YoYCloseout mix: approaching normalized levels
    		4%4%—-7%
    EMEA
    Marketplace largely cleaned, with promotional activity increasing across the industry. Furthest ahead in repositioning NIKE Digital to a full-price business, but traffic and demand remain soft.
    NIKE Direct growth: -6%NIKE Digital growth: -13%NIKE Stores growth: 1%Wholesale growth: 4%EBIT growth: -7%Running growth: double-digitGlobal Football and training footwear growth: low single-digitSportswear decline: low single-digitInventory units: down mid-single digits YoYCloseout mix: normalized level
    		1%1%—-7%
    Greater China
    Facing structural challenges with declining revenue and EBIT. Aggressive marketplace actions reduced owned and partnered inventory, but store traffic and in-season sell-through remain headwinds. Digital marketplace is highly promotional.
    NIKE Direct growth: -12%NIKE Digital growth: -27%NIKE Stores growth: -4%Wholesale growth: -9%EBIT growth: -25%Running growth: high single-digitInventory: down 11% YoYCloseout mix: elevated
    		-10%-10%—-25%
    APLA
    Delivering mixed results across countries with pockets of elevated inventory requiring higher promotional activity. NIKE Digital showed sequential improvement in markdown rates. Additional actions are being taken to rebalance inventory levels.
    NIKE Direct growth: -6%NIKE Digital growth: -8%NIKE Stores growth: -5%Wholesale growth: 6%EBIT growth: -13%Running growth: double-digitTraining growth: high single-digitSportswear decline: low single-digitInventory: grew high single digits
    		1%1%—-13%

    Operational metrics

    14
    Gross Margin
    42.2%down 320 bps
    Q1 FY26

    Reported basis, due to higher wholesale discounts, higher discounts in factory stores, increased product costs (including new tariffs), and channel mix headwinds.

    SG&A
    down 1%YoY
    Q1 FY26

    Reported basis, driven by lower brand marketing expense, partially offset by higher sports marketing expense.

    Operating Overhead
    flatYoY
    Q1 FY26

    Compared to the prior year.

    Effective Tax Rate
    21.1%vs 19.6% prior year
    Q1 FY26

    Primarily due to decreased benefit from stock-based compensation.

    Earnings Per Share
    $0.49
    Q1 FY26

    Diluted EPS.

    Tariff Cost (Gross Incremental)
    $1.5 billionup from $1 billion 90 days ago
    annualized

    Estimated annualized gross incremental cost to NIKE due to new reciprocal tariff rates.

    Tariff Net Headwind to Gross Margin
    120 bpsup from 75 bps
    FY26

    Expected net headwind to gross margin for fiscal '26 due to tariffs.

    Organic Traffic (NIKE Digital)
    declining double digits
    Q1 FY26

    Due to strategic decision to become less reliant on classic franchises and pull back on promotions.

    Spring Order Book
    upversus prior year
    Spring

    Growth led by sport, with momentum building with wholesale partners.

    North America NIKE Digital Promo Days
    reduced by more than 50
    Q1 FY26

    Part of strategic actions to reposition NIKE Digital.

    North America NIKE Digital Markdown Rates
    lowered
    Q1 FY26

    Part of strategic actions to reposition NIKE Digital.

    North America Closeout Mix
    approaching normalized levels
    Q1 FY26

    Reflects continued progress on inventory management.

    EMEA Promotional Activity
    increased
    last 90 days

    Across the industry in key countries, leading NIKE to selectively leverage additional discounts on NIKE Direct.

    Greater China Mono-Brand Stores
    over 5,000
    current

    These stores will require investment and time to refresh into distinct sport experiences.

    Industry KPIs

    7
    MetricValueDetails
    Effective tax rate21.1%%
    Inventory positiondecreased 2%%
    Revenue by channel—
    Operating margin sg a42.2%%
    Store fleet door investment—
    Tariff cost exposure recovery$1.5 billionUSD
    Franchise product cycle performance—

    Product announcements

    9
    ProductTypeDetails
    Vomero, Structure, Pegasusupdate
    Phantom 6launch
    Tiempolaunch
    Mercuriallaunch
    New Apparel Innovation Platformlaunch
    Radical Airlaunch
    ACG Ultraflylaunch
    SKIMS x NIKE product linelaunch
    Agassi's Tech Challenge sneakerslaunch

    Deals & partnerships

    1
    SKIMSCollaboration to create performance training product.

    Combines NIKE's innovation expertise with SKIMS' dedication to inclusive apparel. Debuted a product line with 58 silhouettes, receiving very strong early consumer response.

    Risks & headwinds

    7
    Cautious Consumer EnvironmentNear-term

    Organic traffic has slowed in NIKE Digital.

    Mitigation: Focus on Win Now actions, inspiring through sport, and closely monitoring consumer signals.

    Tariff Uncertainty and Increased CostsFY26 and beyond

    Gross incremental cost of approximately $1.5 billion annually; net headwind of 120 bps to gross margin in FY26 (up from 75 bps).

    Mitigation: Evaluating and implementing actions to mitigate new costs over time, leveraging scale and leadership experience.

    Sportswear Business DeclineOngoing

    Business continues to decline; classic footwear franchises (Air Force 1, Air Jordan 1, Dunk, Chuck Taylor) require aggressive management.

    Mitigation: Building a clear product construct in sportswear, similar to performance sports, and resetting classic franchises.

    Greater China Structural ChallengesThroughout FY26

    Revenue declined 10%, EBIT declined 25%; seasonal sell-through underperforms, requiring larger investments to clean the marketplace; digital marketplace is highly promotional.

    Mitigation: Leading with sport, innovative product, local-for-local product, better storytelling, elevating the overall marketplace, refreshing store concepts, and improving operational strength in physical doors.

    NIKE Direct Organic Traffic SlowdownThroughout FY26

    Organic traffic has slowed, declining double digits; not expected to return to growth for FY26.

    Mitigation: Working to find the right assortment and marketing mix to consistently bring consumers back to the digital ecosystem, repositioning as a full-price business.

    Converse Marketplace ResetThroughout FY26

    Expected revenue and gross margin headwinds to continue throughout FY26.

    Mitigation: New leadership in place, taking aggressive actions to better position the brand for profitable growth.

    Teams Settling into Sport OffenseNear-term

    Teams are still settling into the new organizational structure.

    Mitigation: Continued focus on the Sport Offense to drive hyper-focus on the athlete, creative ideas, and marketplace coverage.

    What to watch in Q2 FY26

    5

    Sportswear Business Recovery

    next quarter
    CurrentContinues to decline
    TargetSigns of stabilization or growth

    Why it matters

    Sportswear is a significant part of the business, and its turnaround is crucial for overall revenue and margin improvement.

    Our business continues to decline. Continuing to build a clear product construct in sportswear as we're doing and our performance sports remains a priority.

    Q&A highlights

    6

    How does the positive spring order book compare to the holiday book, and what are the medium-term margin targets given the current pressures?

    Management noted the spring order book is up year-over-year, driven by a focus on sport and leveraging the full portfolio, with North America leading. For margins, FY26 pressures are due to short-term mix, Win Now actions, and tariffs. While the outlook for FY26 margins has moderated due to tariffs and challenges in Greater China/Converse, the company still believes double-digit margins are achievable long-term by reigniting organic growth, improving full-price mix, and driving operating leverage.

    “As I look longer term, I think that we continue to believe that double-digit margins are something that are achievable.”

    asked by Michael Binetti · answered by Matthew Friend

    2 min read6 chapters

    Detailed Narrative

    01

    Implementation of the Sport Offense

    NIKE is realigning approximately 8,000 teammates to its new "Sport Offense," which organizes the three brands (NIKE, Jordan, Converse) into more nimble, focused teams by sport. This aims to gain sharper insights, fuel innovation, and connect with sport communities more meaningfully. The goal is to maximize NIKE Inc.'s portfolio by driving growth across all dimensions, leveraging distinct brand identities and retail channels at every price point.

    02

    Running Business as a Proof Point

    The running business serves as an early indicator of the Sport Offense's impact, growing over 20% this quarter. The team redesigned key running footwear styles like the Vomero, Structure, and Pegasus to address athlete needs for cushioning, stability, and energy return, integrating innovation platforms such as Nike Air, Flyknit, ZoomX, and React X. This success demonstrates the potential for applying the Sport Offense to other sports and sport culture.

    03

    Strategic Initiatives and Partnerships

    NIKE is preparing for the 2026 World Cup with its global football team, planning to debut a new apparel innovation platform and launch football streetwear collections. The company is also investing in NIKE ACG for outdoor products, introducing innovations like Radical Air apparel and the Trail-Tuned Super Shoe ACG Ultrafly. A new partnership with SKIMS aims to create performance training products with an inclusive approach, debuting 58 silhouettes with strong early consumer response.

    04

    Challenges in Sportswear and NIKE Direct

    The Sportswear business continues to decline, requiring clearer product constructs and healthier positioning for classic franchises. While Air Force 1 is stabilizing and Air Jordan 1 inventory is improving, the Dunk is being aggressively managed down, and Chuck Taylor is undergoing a global market reset. NIKE Digital is struggling with organic traffic decline due to strategic decisions to reduce promotions and reliance on classic franchises, impacting its return to growth in FY26.

    05

    Greater China Market Dynamics

    Greater China revenue declined 10%, facing structural challenges and underperforming seasonal sell-through, necessitating larger investments to clean the marketplace. Despite strong consumer response to innovations like Vomero 18 and athlete activations, traffic declined in both NIKE-owned and partner stores. The company is focused on improving sell-through by refreshing store concepts around sport, creating brand distinction, and reducing aged inventory, acknowledging this will take time and investment.

    06

    Tariff Impact and Mitigation Efforts

    Newly increased reciprocal tariffs now represent an estimated gross incremental cost of approximately $1.5 billion on an annualized basis, up from $1 billion previously. This is expected to result in a net headwind of 120 basis points to gross margin in fiscal '26, an increase from the prior 75 basis points. Management is evaluating and implementing actions to mitigate these costs over time⏳, leveraging the company's scale and experience.

    AI-generated summary of the company’s earnings call. Not investment advice.