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    NKE
    Earnings call· Nov 2025(Q2 FY26)

    NIKE, Inc. NKE

    Dec 18, 2025 Source

    Executive summary

    NIKE Q2 FY26 — North America Momentum and Product Diversification Offset China Headwinds

    NIKE is in the "middle innings" of its comeback, driven by "Win Now actions" and a "sport offense" strategy. While North America shows strong momentum and product diversification is progressing, significant headwinds persist in Greater China and NIKE Direct, impacting overall profitability. Management is focused on margin expansion and operational efficiency to return to sustainable, profitable growth.

    Highlights

    5

    • North America Q2 revenue grew 9%, with wholesale up 24%, demonstrating a healthy, repeatable offense.

    • NIKE brand grew this quarter, with Running growing over 20% for the second consecutive quarter and gaining market share.

    • Wholesale returned to growth, with a growing order book globally for both spring and summer.

    • Inventory decreased 3% versus prior year, with units down high single digits, and is in a healthy position in North America and EMEA.

    • North America gross margins declined only 330 basis points despite a 520 basis point tariff impact, indicating underlying profitability recovery.

    Concerns

    5

    • Gross margins declined 300 basis points to 40.6% due to increased product costs from higher tariffs and inventory obsolescence in Greater China.

    • Greater China Q2 revenue declined 16%, with EBIT down 49%, and headwinds are expected to continue for the balance of the fiscal year.

    • NIKE Direct was down 9%, with NIKE Digital declining 14% and NIKE stores down 3%.

    • Annualized incremental product costs of $1.5 billion due to higher U.S. tariffs represent a gross headwind of approximately 320 basis points to FY26 gross margin.

    • Q3 revenue is expected to be down low single digits.

    Guidance & targets

    7
    CategoryTargetConfidence
    Q3 Revenue
    down low single digits
    high materiality
    High
    Q3 Gross Margins
    down approximately 175 to 225 basis points
    high materiality
    High
    Q3 SG&A Dollars
    up low single digits
    medium materiality
    High
    Q3 Other Expense, Net of Interest Income
    $0 to $10 million income
    low materiality
    High
    FY26 Annualized Incremental Product Costs (Tariffs)
    $1.5 billion
    high materiality
    High
    Classics Footwear Franchises Decline
    more than $4 billion
    medium materiality
    High
    EBIT Margins
    double-digit EBIT margins
    high materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    North America
    Best example of executing Win Now actions, momentum extending beyond Running into basketball and training. Benefited from liquidation to value channels, but also balanced contribution from new and existing partners. NIKE.com posted best Black Friday ever. Gross margins down 330 bps despite 520 bps tariff impact.
    NIKE Direct: down 10%NIKE Digital: down 16%NIKE stores: down 2%Wholesale: grew 24%Inventory: declined mid-single digitsUnits: down double digits
    		Up 9%——EBIT declined 8%
    EMEA
    Maintained a healthy marketplace, though promotional activity heavier than expected. Growth in Central and Eastern Europe and Middle East offset by slight declines in Western Europe. Performance business building momentum, double-digit growth in Running. Sportswear growth driven by apparel, footwear flat.
    NIKE Direct: declined 3%NIKE Digital: down 2%NIKE stores: down 5%Wholesale: flatInventory: grew double digitsUnits: flat
    		Down 1%——EBIT declined 12%
    Greater China
    Priority is to create greater brand distinction through sport and innovation. Faced consistent challenges with declining store traffic, softer sell-through, and higher aged inventory. Initial NIKE store pilot delivered encouraging results. Less promotional during 11.11 (down 35% YoY). Reduced sell-in plans for spring and cut buys for summer.
    NIKE Direct: declined 18%NIKE Digital: down 36%NIKE stores: down 5%Wholesale: declined 15%Inventory: reduced mid-teensUnits: down 20%
    		Declined 16%——EBIT declined 49%
    APLA
    Mixed results across countries, with positive results in Latin America offset by headwinds in Asia Pacific. Leveraged promotions to address pockets of excess inventory. Running grew double digits, apparel grew mid-single digits overall.
    NIKE Direct: declined 5%NIKE Digital: down 10%NIKE stores: up 1%Wholesale: down 3%Inventory: grew double digitsUnits: up mid-single digits
    		Down 4%——EBIT declined 15%

    Operational metrics

    19
    Revenue
    Up 1%YoY
    Q2 FY26

    Reported basis.

    Revenue
    FlatYoY
    Q2 FY26

    Currency-neutral basis.

    Revenue (currency-neutral, ex-Classics headwind)
    Grew 6%YoY
    Q2 FY26

    Excluding approximately $550 million top line headwind from Classics franchises.

    NIKE Direct Revenue
    Down 9%YoY
    Q2 FY26

    Overall NIKE Direct performance.

    NIKE Digital Revenue
    Declining 14%YoY
    Q2 FY26

    Component of NIKE Direct.

    NIKE Stores Revenue
    Down 3%YoY
    Q2 FY26

    Component of NIKE Direct.

    Wholesale Revenue
    Grew 8%YoY
    Q2 FY26

    Overall wholesale performance.

    Gross Margin
    40.6%Down 300 bps
    Q2 FY26

    Reported basis, primarily due to increased product costs from higher tariffs and inventory obsolescence in Greater China.

    SG&A
    Up 1%YoY
    Q2 FY26

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

    Effective Tax Rate
    20.7%vs 17.9% prior year
    Q2 FY26

    Primarily due to changes in earnings mix.

    EPS
    $0.53
    Q2 FY26

    Earnings per share.

    Inventory
    Decreased 3%YoY
    Q2 FY26

    Overall inventory position.

    North America Gross Margin Tariff Impact
    520 bpsheadwind
    Q2 FY26

    Impact from new U.S. tariffs on North America gross margins.

    North America Running Growth
    High double-digit growth
    Q2 FY26

    Across NIKE-owned stores, NIKE Digital, and wholesale.

    North America Sportswear Growth
    Up low single digits
    Q2 FY26

    Sequential improvement.

    Greater China 11.11 Promotional Activity
    35% declineYoY
    Q2 FY26

    In line with plans to reduce promotional activity.

    World Cup '26 Football Order Book
    Nearly 40% highervs World Cup '22
    Future

    Indicates strong confidence from wholesale partners.

    Running Growth
    Over 20%YoY
    Q2 FY26

    For the second quarter in a row, up double digits in every channel including NIKE Direct.

    Chief Operating Officer Appointment
    —
    Q2 FY26

    Venkatesh Alagirisamy appointed to look end-to-end at technology integration for efficiency and profitability.

    Industry KPIs

    7
    MetricValueDetails
    Effective tax rate20.7%%
    Inventory positionDecreased 3%%
    Revenue by channelNIKE Direct down 9%; Wholesale grew 8%%
    Operating margin sg aUp 1%%
    Store fleet door investment100 NIKE Direct and 1,400 partner doorsdoors
    Tariff cost exposure recovery$1.5B annualizedUSD
    Franchise product cycle performanceRunning grew >20%%

    Product announcements

    7
    ProductTypeDetails
    Structure Pluslaunch
    Nike Mindlaunch
    Therma-FIT Air Milano jacketlaunch
    Aero-FITlaunch
    NikeSKIMS collectionexpansion
    T90 collaboration with Palacelaunch
    Hollywood Keepers sportswear collectionlaunch

    Risks & headwinds

    5
    Margin Pressure from Win Now ActionsNear-term

    Gross margins declined 300 basis points to 40.6% in Q2.

    Mitigation: Intentional actions to clean up marketplaces, focus on margin expansion as a top priority.

    Tariff HeadwindsFY26

    $1.5 billion annualized incremental product costs; gross headwind of ~320 bps to FY26 gross margin (net impact ~120 bps); Q2 North America gross margin impacted by 520 bps headwind; Q3 gross margin impacted by 315 bps headwind.

    Mitigation: Actions taken to reduce net impact to ~120 bps.

    Greater China Marketplace ChallengesBalance of FY26 and beyond

    Q2 revenue declined 16%, EBIT declined 49%; declining store traffic, softer in-season sell-through, higher aged inventory, off-price positioning, higher obsolescence charges.

    Mitigation: Resetting approach, initial store pilots, reduced promotional activity, accelerated returns/write-offs of aged inventory, reduced sell-in plans, increased investments in key cities.

    Non-linear Business RecoveryOngoing

    Different brands, sports, and geographies recovering on different timelines.

    Mitigation: Reading and reacting daily, maintaining flexibility to make decisions for long-term brand health.

    Promotional Activity in EMEAQ2 FY26

    Heavier than expected promotional activity.

    Mitigation: Inventory in Europe is in a healthy place.

    What to watch in Q3 FY26

    5

    Greater China revenue trajectory

    Next quarter (Q3 FY26 results)
    CurrentDeclined 16% in Q2, similar performance expected in Q3
    TargetSigns of stabilization or reduced decline

    Why it matters

    China is a significant long-term opportunity, and its current headwinds are materially impacting overall results.

    In Greater China, Q2 revenue declined 16%... We expect headwinds to continue, but we are working to set the foundation for a return to growth in this important geography.

    Q&A highlights

    5

    Elaborate on the 'middle innings' analogy, where NIKE has scored and where opportunities remain, and detail Q3 gross margin components, especially underlying expansion excluding tariffs.

    Elliott explained the 'Win Now actions' and 'sport offense' are driving growth, with North America leading. He detailed varying speeds of recovery across brands, product categories, and geographies, noting North America's success and China's longer road. Matt clarified Q3 gross margin guidance, emphasizing positive expansion excluding tariff impacts, driven by North America's marketplace cleanup and repositioning.

    “The drivers of our growth right now for NIKE, they came through the Win Now actions which were our near-term actions around culture, product, storytelling, the marketplace and winning on the ground with consumers. But it's our sport offense is the accelerator of those actions.”

    asked by Matthew Boss · answered by Elliott Hill

    2 min read6 chapters

    Detailed Narrative

    01

    Win Now Actions and Sport Offense Strategy

    NIKE's fiscal year '26 is focused on executing "Win Now actions" to rightsize the Classics business, elevate NIKE Digital, diversify the product portfolio, deepen consumer connections, strengthen partner relationships, and realign teams. The "sport offense" is identified as the accelerator for these actions, connecting athlete-centered innovation with global marketplace amplification. This strategy aims to drive growth through sport, athletes, product innovation, and key sport moments, scaled across countries, channels, and accounts.

    02

    Geographic Leadership Realignment

    CEO Elliott Hill announced a significant leadership change, with all geographies now reporting directly to him. This realignment is intended to accelerate "Win Now" actions by enabling geography General Managers to more closely shape strategy, drive faster decisions, and influence investments. The goal is to enhance local relevance and execution, particularly in sales and product presentation.

    03

    North America's Strong Performance and Playbook

    North America is highlighted as the leading geography, demonstrating successful execution of the "Win Now" actions. The region achieved over 20% wholesale growth in Q2, with significant contributions from both new and existing partners. Momentum is extending beyond Running into other sports like basketball and training, and NIKE Digital has been successfully repositioned for a more premium experience with fewer promotions and higher full-price demand. This success serves as a playbook for other geographies.

    04

    Greater China Reset and Challenges

    Greater China faces a "longer road to a healthier business" due to persistent challenges including declining store traffic, softer in-season sell-through, and elevated aged inventory. The region has struggled with off-price positioning, impacting its premium status and profitability. Management is implementing a reset, including initial store pilots showing encouraging results, reduced promotional activity during 11.11, and accelerated returns and write-offs of aged inventory to clean the marketplace. Further shifts are needed to break the cycle and return to growth.

    05

    Diverse Product Innovation Pipeline

    NIKE is actively building a more diverse product portfolio, with strong traction in its performance business. Upcoming innovations include the Structure Plus running shoe and Nike Mind footwear platform for training, both launching in January. New apparel platforms like the Therma-FIT Air Milano jacket (Winter Olympics) and Aero-FIT (national team kits) are also set to debut. The order book for World Cup '26 football products is nearly 40% higher than World Cup '22, indicating strong future product demand.

    06

    Focus on Operational Efficiency

    Venkatesh Alagirisamy has been appointed Chief Operating Officer to enhance operational efficiency. His role will involve an end-to-end review of how technology is integrated across the company's processes, from creation and planning to manufacturing, delivery, and sales. Management sees significant opportunities to run core operations more efficiently and profitably, with further details on these initiatives expected in upcoming quarters.

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