Nike, Inc. continued to experience softness across sportswear categories in China and within Nike Direct, and now expects a tariff bill this year of $1.5 billion, up from the previously estimated $1 billion. However, results for the first quarter easily surpassed expectations, driven by momentum within running, the North America geography and wholesale overall, with CEO Elliott Hill confident that Nike’s “Win Now” actions are gaining traction.
“This quarter, our ‘Win Now’ actions drove momentum in the areas we prioritized first, running, North America and wholesale partners,” said Elliott Hill, CEO, on an analyst call. “It showed that we’re making the right choices. Consumers are responding. We’re getting some wins under our belt.”
Hill spent much of his comments discussing Nike’s steps to realign the organization around a new “Sports Offense” strategy, a new initiative that aligns its three brands, Nike, Jordan and Converse, “into more nimble-focused teams by sport.”
He elaborated, “We’ll gain sharper insights to fuel innovation and storytelling and connect with the communities of each sport in more meaningful ways. Collectively, we’ll have a better coordinated attack with each brand forming a distinct identity and delivering a clear attention to serve different consumers. In the marketplace, organizing by sport gives us a much clearer point of view.”
Examples cited of the strategy already showing success include Nike’s House of Innovation store in New York, which is seeing double-digit increases after being refreshed to emphasize running, global football and Jordan. On a smaller scale, Nike’s South Congress store in Austin has seen sales significantly increase after offerings were paired down to only running and training.
Among categories, Hill said running saw 20 percent growth in the quarter, reflecting a refresh of offerings based on insights from runners. He said with the brand’s running line-up of Vomero, the Structure and the Pegasus, Nike now has a consistent structure of silos and price points to allow the brand to introduce at least one new major running footwear style each season.
Said Hill, “Our opportunity is to quickly seize the benefits of a Sport Offense and apply them to more sports and sport culture, including global football, basketball, training and sportswear.”
He called out opportunities Nike is pursuing to build out the Sports Offense in global football around the 2026 World Cup as well as within American football with its recent “Scary Good” campaign. He added that the longer-term vision is for the impact of the Sport Offense to be “felt far beyond the traditional sports where we currently compete,” citing the bigger push being put behind the Nike ACG outdoor range and the “very strong” consumer response seen to the NikeSkims collaboration.
Among regions, a highlight in the quarter was North America, which returned to growth in the first quarter after a year and has benefited from efforts to repair wholesale partnerships.
“We reset over 1,300 running spaces in the quarter, from Dick’s to Nordstrom’s to Heartbreak Hill. And we are also pleased with the launch of the Nike Brand store on Amazon, where we are driving stronger engagement and sales than anticipated,” said Hill. “While our North America teams are setting the tone, we’re still far from our ultimate goal of elevating an integrated for marketplace, digital and physical, wholesale and Nike Direct in all geographies.”
Among the areas of Nike’s business still being pressured is China, where sales were down 10 percent in the quarter. Hill said the region is facing ‘structural challenges” broadly. He said, “Our team is moving with urgency to develop consistent plans across all sports and refresh some of our retail environments into distinct sport experiences. With over 5,000 mono-brand stores in China, this will take investment, and it will take time.”
Globally, Nike Digital is “still working to find solid ground,” with efforts continuing to become less reliant on classic franchises and less promotional. Said Hill, “Organic traffic has slowed. We are working to find the right assortment and marketing mix to consistently bring consumers back to our digital ecosystem.”
Sportswear sales also continue to decline, with progress being made in rebalancing inventories of its largest classic franchises across the Nike Jordan and Converse brands. Said Hill, “Air Force 1 is stabilizing. Air Jordan one inventory levels are returning to health. The Dunk continues to be managed aggressively down in all geos, and the Chuck Taylor is in the early stages of a global market reset.
He added, “With Converse, we just put new leadership in place and we’re going to take aggressive actions to better position the brand for profitable growth in the future.”
Hill concluded his comments by stressing that he’s “realistic that we are turning our business around in the face of a cautious consumer, tariff uncertainty and teams that are still settling into the Sport Offense. We know we have a lot left to prove.”
However, he’s confident that the Win Now actions “are absolutely the right focus for our teams.”
He added, “What gives me confidence is that through the Sport Offense, we’re hyper-focused on the athlete. The creative ideas keep coming, and we’re covering a lot of ground in the marketplace.”
Nike’s First Quarter Sales Top Analyst Targets
Total revenues were $11.7 billion, up 1.1 percent on a reported basis and down 1 percent on a currency-neutral basis. Nike had guided sales to decline in the mid-single digits, and the analysts’ consensus estimate had been $11.0 billion.
Nike Brand revenues were $11.4 billion in the quarter, up 2.3 percent on a reported basis and flat on a currency-neutral basis. Currency-neutral growth in North America was offset by a decline in Greater China.
- Nike Direct revenues were $4.5 billion, down 4 percent on a reported basis and down 5 percent on a currency-neutral basis, due to a 12 percent decrease in Nike Brand Digital and a 1 percent decline in Nike-owned retail stores.
- Wholesale revenues were $6.8 billion, up 7 percent on a reported basis and up 5 percent on a currency-neutral basis.
Converse Brand revenues were $366 million for the quarter, down 27 percent on a reported basis and down 28 percent on a currency-neutral basis, due to declines across all territories.
Nike Brand Divisional Summary
See additional region/divisional data in the Appendix at bottom.
North America Returns to Positive Growth
North America revenues for Nike Brand, including Jordan, improved 4.0 percent to $5.02 billion a year ago, recovering from an 11 percent decline seen in the first quarter. On a currency-neutral basis, sales climbed 4 percent, rebounding from an 11 percent decline seen in the fiscal fourth quarter. Nike Direct declined 3 percent, with Nike Digital down 10 percent and Nike stores flat. Wholesale grew 11 percent. EBIT declined 6.7 percent to $1.13 billion.
Company CFO Matt Friend said North America is furthest ahead in taking steps to elevate and transform the marketplace.
“Running, training and basketball each delivered double-digit growth. Sportswear grew in the quarter, but there is still work to do with momentum in apparel and looks of running footwear, while managing a 30 percent decline in our classic footwear franchises,” said Friend.
“Sportswear grew in the quarter, but there is still work to do with momentum in apparel and looks of running footwear, while managing a 30 percent decline in our classic footwear franchises.
He said wholesale returned to growth, partially due to shipment timing in the prior year, as well as higher liquidation volume to off-price channels. Additionally, strategic actions taken to expand distribution and reach new consumer segments “contributed to growth and are showing initial promise.”
Nike has returned to many stores it had exited during its former push to emphasize direct-to-consumer growth, including Urban Outfitters and JCPenney this year, while introducing the Jordan Brand to Academy Sports and Famous Footwear.
Friend added that progress is being made repositioning Nike Digital in North America, with the number of days of site-wide promotion by more than 50, lowering markdown rates, as well as increasing share of demand at full price.
Added Friend, “On inventory, North America drove continued progress through the first quarter. Units declined compared to the prior year, while dollars remained flat, primarily due to the U.S. tariffs. Closeout mix is approaching normalized levels.”
EMEA Benefits from Reduced Promotions
Europe, Middle East & Africa (EMEA) sales for the Nike Brand rose 6.0 percent to $3.33. Sales gained 1 percent on a currency-neutral basis, also recovering strongly from a 10 percent decline seen in the prior quarter. Nike Direct declined 6 percent, with Nike Digital down 13 percent and Nike Stores up 1 percent. Wholesale grew 4 percent. EBIT fell 7.2 percent to $735 million.
Friend said, “EMEA has largely cleaned the marketplace even as promotional activity has increased across the industry. Nike’s momentum is building in sport and with our wholesale partners.”
The CFO said EMEA is furthest ahead in repositioning Nike Digital to a full-price business, although “traffic and demand remain soft.” Among categories, Nike’s performance business continued to build momentum in EMEA, driven by double-digit growth in running and low single-digit growth in Global Football and training footwear. Sportswear declined low single digits as liquidation efforts in classic footwear franchises more than offset growth in apparel and new dimensions of footwear.
Friend said over the last 90 days, promotional activity has increased in key countries across EMEA, and additional discounts have been employed on Nike Direct to manage marketplace inventory. Overall inventory in EMEA closed the quarter with units down mid-single digits versus the prior year and a normalized level of closeout mix.
Greater China Impacted by Weak Traffic, Heavy Promotions
Revenues in Greater China for the Nike Brand fell 9.2 percent to $1.51 billion a year ago. Sales dropped 10 percent on a currency-neutral basis after sliding 20 percent in the fourth quarter. Nike Direct declined 12 percent, with Nike Digital down 27 percent and Nike stores down 4 percent. Wholesale declined 9 percent. EBIT declined 24.9 percent to $377 million.
Friend said, “Aggressive marketplace actions have reduced owned and partnered inventory. However, store traffic and in-season sell-through continue to be a headwind.”
A bright spot was running, which grew into the high single digits in the quarter, with strong consumer response to new innovations, such as the Peg Premium and the Vomero 18. Traffic declined versus the prior year in both Nike-owned and partner stores, resulting in lower in-season sell-through rates. Digital remains a “highly promotional marketplace in Greater China with consumer shopping moments extending longer on local platforms with deeper discounts,” according to Friend.
Inventory in China was down 11 percent compared to the prior year, although the closeout mix remains elevated. Said Friend, “Our priority in Greater China is to improve seasonal sell-through trends by refreshing store concepts around sport, creating greater brand distinction at retail with more productive merchandising assortments and reducing the mix of aged inventory with our partners.”
APLA Progress Pressured by Promotional Activity
Asia Pacific & Latin America (APLA) revenues for Nike Brand were up 1.9 percent to $1.49 billion from $1.46 billion. Sales inched up 1 percent on a currency-neutral basis after declining 3 percent in the fourth quarter. Nike Direct declined 6 percent, with Nike Digital down 8 percent and Nike Stores down 5 percent. Wholesale grew 6 percent. EBIT declined 12.9 percent to $350 million from $402 million.
Friend said, “APLA continues to deliver mixed results across countries with pockets of elevated inventory requiring higher levels of promotional activity, and proactive management of supply in the marketplace.”
Performance categories delivered strong growth, led by double-digit growth in running and high single-digit growth in training, helping offset low single-digit declines in Sportswear. Nike Digital delivered sequential improvement in markdown rates across all territories. Added Friend, “Inventory across APLA grew high single digits this quarter, and so we are taking additional actions to rebalance inventory levels with retail sales trends in certain countries and tightened buys on Nike Direct.”
Profitability and Expenses
Gross margin declined 320 basis points to 42.2 percent of sales in Q1, said to be due to: a lower average selling prices due to higher wholesale discounts and higher discounts in Nike factory stores; as well as increased product costs, including new tariffs impacting North America, and channel mix headwinds.
Selling and administrative expenses decreased 1 percent to $4.0 billion in the first quarter, said to be driven by lower brand marketing expense, reflecting prior-year investment around key sports moments, partially offset by higher sports marketing expense..
- Demand creation expense was $1.2 billion, down 3 percent, primarily due to lower brand marketing expense reflecting higher investment in key sports events in the prior year, partially offset by higher sports marketing expense in the current year.
- Operating overhead expense was $2.8 billion, unchanged from the prior year, primarily due to higher wage-related expenses, offset by lower other administrative costs.
Effective tax rate was 21.1 percent compared to 19.6 percent for the same period last year, primarily due to decreased benefits from stock-based compensation.
Earnings before interest and taxes (EBIT) slumped 28.5 percent to $904 million from $1.26 billion.
Net income for the quarter was $0.7 billion, down 30.8 percent year-over-year, and diluted earnings per share were 49 cents, a decrease of 30 percent versus fiscal Q1 2025. EPS was ahead of analysts’ consensus target of 27 cents per share.
Tariff Costs Rising
Friend said Nike now estimates the gross incremental cost from tariffs to Nike on an annualized basis to be approximately $1.5 billion, up from the $1 billion shared since its last quarterly call in June due to the increase in reciprocal tariffs for certain countries. Given the magnitude and timing of the most recent rate increases, Nike now expects the net gross margin headwind in FY26 to increase from approximately 75 basis points to 120 basis points.
Friend said, “We continue to evaluate and implement the actions I described last quarter to mitigate these new costs over time. We are monitoring developments closely, and I remain confident in our ability to leverage our strengths, our scale, and the deep experience of our leadership team to navigate through this disruption.”
Balance Sheet Summary
Inventories for Nike, Inc. were $8.1 billion at quarter-end, down 2 percent compared to the prior year quarter-end, reflecting a decrease in units, partially offset by increased product costs, primarily due to higher tariffs in North America.
Cash and equivalents and short-term investments totaled $8.6 billion, down roughly $1.7 billion from 2024, as cash generated by operations was more than offset by cash dividends, share repurchases, bond repayments and capital expenditures.
Shareholder Returns
Nike has a strong track record of returns to shareholders, including 23 consecutive years of increasing dividend payouts. In the first quarter, the company returned approximately $714 million to shareholders, including:
- Dividends of $591 million, up 6 percent from the prior year.
- Share repurchases of $123 million, reflecting 1.8 million shares retired as part of the Company’s four-year, $18 billion program approved by the Board of Directors in June 2022.
As of August 31, 2025, a total of 124.4 million shares have been repurchased under the program, representing a total value of approximately $12.1 billion.
Outlook
For the fiscal second quarter, revenues are expected to decline in the low single digits, including a one-point benefit from foreign exchange. Q2 gross margins to be down approximately 300 to 375 basis points, including a net headwind of 175 basis points from the new incremental tariffs. SG&A dollars are expected to increase by a high single-digit percentage, with an acceleration of demand creation investment and a low single-digit increase in operating overhead.
Nike continued not to provide sales and profit guidance for the year due to uncertainties related to tariffs and Nike’s transformation efforts, but Friend did offer some guidance.
He said wholesale revenue is expected to return to modest growth for FY26, with the spring order book up versus the prior year, led by performance categories. Friend said, “We see momentum building with our wholesale partners.”
Nike Direct isn’t expected to return to growth for FY26 as organic traffic continues to decline by double digits. Said Friend, “With the business in the prior year, that was more concentrated on classic footwear franchises and sneaker launch as well as a higher mix of off-price sales, traffic comps will remain under pressure.”
By operating segment, North America is expected to continue leading the global recovery, while revenue and gross margin headwinds are anticipated from Greater China and conversely, to persist throughout FY26. Friend said China “will require more time” due to marketplace dynamics, while Converse is under new leadership and resetting its marketplace and brand.
Friend said that, in aggressive actions taken to clear inventories of classic franchises, Nike has made “steady progress on our plans for a healthy marketplace by the end of the first half.” Nike expects “to begin to see a modest headwind on revenue across both wholesale and Nike Direct as we lap aggressive clearance activity in the prior year.”
SG&A is expected to grow in the low single digits in fiscal 2026, driven by investments in Win Now action steps to spur growth. Friend concluded, “Overall, there are several puts and takes across different dimensions of our portfolio. We are encouraged with how we have started the year, but progress won’t be linear, and there is still work to do to return to driving consistent, sustainable and profitable long-term growth.”
Appendix
Image and financial charts courtesy Nike, Inc.
