Nike, Inc. reported earnings for the second quarter declined 32 percent in the fiscal second quarter ended November 30 but easily topped analysts’ consensus targets. Sales inched up 1 percent as a 9 percent jump in North America, led by wholesale gains, offset declines in all other regions.

Sales of $12.4 billion topped analysts’ consensus target of $12.2 billion. Earnings of 53 cents compared with the consensus estimate of 37 cents.

“Nike is in the middle innings of our comeback. We are making progress in the areas we prioritized first and remain confident in the actions we’re taking to drive the long-term growth and profitability of our brands,” said Elliott Hill, president and CEO, Nike, Inc. “Fiscal 26 continues to be a year of taking action through Win Now, including realigning our teams, strengthening partner relationships, rebalancing our portfolio, and winning on the ground. We’re finding our rhythm in our new sport offense and setting ourselves up for the next phase of athlete-centered innovation in an elevated and integrated marketplace.”

Second Quarter Divisional Revenues


 

“In the second quarter, we demonstrated the resilience of our portfolio, delivering modest top-line reported growth while managing headwinds from repositioning our business in a dynamic operating environment,” said Matthew Friend, executive vice president & chief financial officer, Nike, Inc. “We are making the shifts required to position our portfolio for a full recovery and driving real-time decisions in service of the long-term health of our brands.”

Second Quarter Revenue Summary
Revenues for Nike, Inc. were $12.4 billion, up 1 percent on a reported basis and flat on a currency-neutral basis.

  • Nike Brand revenues were $12.1 billion, up 1 percent on a reported and currency-neutral basis, primarily due to growth in North America, partially offset by declines in Greater China and APLA.
  • Wholesale revenues were $7.5 billion, up 8 percent on a reported and currency-neutral basis, primarily due to growth in North America.
  • Nike Direct revenues were $4.6 billion, down 8 percent on a reported basis and down 9 percent on a currency-neutral basis, due to a 14 percent decrease in Nike Brand Digital and a 3 percent decrease in Nike-owned stores.
  • Revenues for Converse were $300 million, down 30 percent on a reported basis and down 31 percent on a currency-neutral basis, due to declines across all territories.

Profitability and Expenses
Gross margin decreased 300 basis points to 40.6 percent, primarily due to higher tariffs in North America.

Selling and administrative expense increased 1 percent to $4.0 billion.

    • Demand creation expense was $1.3 billion, up 13 percent, primarily due to higher brand marketing and sports marketing expenses.
    • Operating overhead expense was $2.8 billion, down 4 percent, primarily due to lower wage-related expense and lower other administrative costs.

The effective tax rate was 20.7 percent compared to 17.9 percent for the same period last year, primarily due to changes in earnings mix.

Net income was $0.8 billion, down 32 percent, and diluted earnings per share were 53 cents, a decrease of 32 percent.

Operating Profit Summary

Balance Sheet Summary
Cash and equivalents and short-term investments were $8.3 billion, down approximately $1.4 billion, as cash generated by operations was more than offset by cash dividends, bond repayment, share repurchases and capital expenditures.

Inventories for Nike, Inc. were $7.7 billion at quarter-end, down 3 percent year-over-year, reflecting a decrease in units, partially offset by increased product costs, primarily due to higher tariffs in North America.

Shareholder Returns
Nike said it has a strong track record of returns to shareholders, including 24 consecutive years of increasing dividend payouts. In the second quarter, the company returned approximately $598 million to shareholders through dividends, up 7 percent from the prior year.

Image courtesy Nike