Nike (NKE) Q2 2025 Earnings

Nike’s Under new CEO Elliott Hill, the turnaround will likely take a little longer than expected. On Thursday, he outlined a strategy to get the company back on track for growth after the retailer blamed heavy discounting for declining sales and profits.

The sneaker giant relies on promotions to drive sales and plans to return its online business to a full-price model, but first it must aggressively clear old inventory through “less profitable channels,” Hill said. the finance director said. Matt Friend.

“What I’ve seen is Nike’s direct, digital and physical traffic is softening because the product isn’t new and they’re not delivering an emotional story,” Hill said. Ta. “As a result, we have become too promotional…earlier this year, our digital platforms were offering approximately 50/50 of list price on promotional sales. “The level not only impacts our brand, but also disrupts” the overall market and the profitability of our partners. ”

As a result, Nike expects gross margins to decline 3 to 3.5 percentage points in the holiday quarter. It also expects sales to decline by low double digits, worse than expected by analysts surveyed by LSEG.

Expectations were low for Nike’s latest quarter ahead of Thursday’s release, but the sneaker giant easily beat Wall Street expectations on sales and bottom line profits.

Here’s how Nike’s Q2 2025 results compare to Wall Street expectations, based on a survey of analysts by LSEG.

Earnings per share: 78 cents vs. 63 cents expected Earnings: $12.35 billion vs. $12.13 billion expected

Nike shares initially soared following the results, but the gains pared after Hill gave opening remarks on a conference call with analysts.

Nike reported net income for the three months ended Nov. 30 was $1.16 billion, or 78 cents a share, down from $1.58 billion, or $1.03 a share, a year earlier.

Sales were $12.35 billion, down approximately 8% from $13.39 billion in the same period last year.

Hill, who joined Nike as an intern in the 1980s and left in 2020, was tasked with turning around the world’s largest sportswear company, which had fallen behind in innovation, lost market share to competitors and failed in its sales strategy. are.

“I have an extraordinary love for this company. I know Nike inside and out and am proud of what the brand stands for,” Hill said in his opening remarks to analysts. “I want to see the company succeed.” “At a time when our team, brand and business are being challenged, my sole focus is to help us get back on track and win again.”

In his opening remarks, Hill scolded his predecessor, John Donahoe, for the strategy that defined his tenure as CEO.

He said the company has spent too many resources focused on driving online sales, paying for performance marketing and isolating wholesale partners. He said he now plans to reverse that strategy. He acknowledged that key wholesale partners feel Nike has turned its back on these partnerships, and said the company is now working to regain trust.

“We know our sales teams have to earn every penny they can ‘buy,’ but we are invested in making sure our partners feel supported,” Hill said. “We don’t just sell products; we actively support mutually beneficial sell-through. Simply put, when our partners win, we win.”

This is good news for partners who: foot locker, JD Sports and dicks sporting goodsrelies on Nike products to increase sales.

Hill also addressed the criticism that has swirled around Nike in recent years. The company has lost sight of what has long defined its brand: athletes and performance, leading to ASICS, OnRunning, and others.

“We lost our attachment to the sport,” Hill said. “We don’t rely on a few sportswear silhouettes.”

Hill appears to be referring to the company’s previous decision during the Donahoe administration to focus growth on three major franchises: the Air Force 1, Dunk and Air Jordan 1. For years, these lifestyle brands drove sales, but Nike made so many shoes that they became commonplace and tacky. As a result, Nike is reducing supply, which it says will impact sales in the short term but hopes not to in the long term.

In the most recent quarter, Nike’s in-store and online sales fell 13%, and wholesale revenue fell 3%. Deep discounts lowered gross margin by 1 percentage point, resulting in gross margin of 43.6%, slightly above StreetAccount analysts’ expectations of 43.3%.

Inventories, another area of ​​concern, were flat year over year at $8 billion. Unit sales increased, offset by lower product input costs and changes in product mix.

Still, inventory was higher than the company would have liked, especially given “recent sales trends,” Friend said.

Nike saw sales decline in all four regions, but results beat expectations in all regions except China. Sales in China fell 8% to $1.71 billion, below the $1.75 billion expected by Street accounts.

In North America, Nike’s sales were $5.18 billion, down 8% but ahead of the $5.01 billion that Street accounts had expected. Sales in Europe, the Middle East and Africa fell 7% to $3.3 billion, slightly above StreetAccount’s estimate of $3.26 billion. Sales in Asia Pacific and Latin America fell 3% to $1.74 billion, beating analysts’ expectations of $1.62 billion.

Nike’s acquisition of Converse in 2003 also weighed on the company’s overall results, with sales for the period down 17% to $429 million, compared to the $462.6 million expected by analysts polled by Street Account. It dropped significantly.

Nike’s shift away from the Dunk and Air Force 1, and their deep discounts, is also impacting Foot Locker. Foot Locker missed Wall Street’s revenue and bottom line estimates in its Dec. 4 third-quarter report, due in part to weak demand for Nike products. CEO Mary Dillon told CNBC at the time.

Hill has had several wins since taking the reins about two months ago. The National Football League announced on December 11 that it had renewed its contract with Nike after the company briefly held negotiations with other bidders. The NFL’s decision to renew its contract with Nike through 2038 is a major vote of confidence amid criticism that it has lagged in innovation and failed to launch Major League Baseball’s uniforms.

Currently, Nike is the exclusive uniform provider for the NFL, MLB, and the National Basketball Association.

As of Wednesday afternoon, Nike stock was down about 27% in 2024, while the S&P 500 index was up about 27%.