Tariffs and digital softness weigh on margins, but leadership signals confidence in long-term turnaround
Nike (NKE) reported mixed results for its fiscal second quarter ended November 30, 2025, as the world’s largest athletic apparel company continues what management describes as the “middle innings” of a broader comeback effort. Revenue rose modestly, driven by strong wholesale performance, while profitability came under pressure from higher tariffs and ongoing shifts in the company’s direct-to-consumer strategy.
Total second-quarter revenue reached $12.4 billion, up 1% on a reported basis and flat on a currency-neutral basis. Growth was led by Nike’s wholesale business, where revenue climbed 8% to $7.5 billion, reflecting improving relationships with retail partners, particularly in North America. In contrast, Nike Direct revenue fell 8% to $4.6 billion, as digital sales declined sharply and traffic at Nike-owned stores softened.
Chief Executive Officer Elliott Hill acknowledged the uneven performance but emphasized progress in key strategic areas. He said Nike is focused on executing its “Win Now” priorities, including realigning teams, strengthening partnerships, rebalancing its product portfolio, and investing in athlete-centered innovation. Hill noted that while the recovery is still underway, the company is beginning to find its rhythm in what he described as a “new sport offense.”
Margin pressure remained a central challenge during the quarter. Gross margin fell 300 basis points to 40.6%, primarily due to higher tariffs in North America. Selling and administrative expenses increased slightly to $4.0 billion, while demand creation spending jumped 13% to $1.3 billion as Nike increased investment in brand and sports marketing. Operating overhead costs declined 4%, reflecting lower wage-related and administrative expenses.
Net income declined 32% to $0.8 billion, and diluted earnings per share fell to $0.53, also down 32% from the prior year. Chief Financial Officer Matthew Friend said the company is making necessary portfolio shifts to support a full recovery, even as near-term earnings remain under pressure.
Regionally, Nike Brand revenue grew in North America but was partially offset by declines in Greater China and Asia Pacific and Latin America. Converse continued to struggle, with revenue dropping 30% amid broad-based weakness across markets.
On the balance sheet, inventories declined 3% to $7.7 billion, reflecting lower unit levels, while cash and short-term investments fell to $8.3 billion due to dividends, debt repayment, share repurchases, and capital spending.
Despite the challenges, management reiterated confidence that the current actions will position Nike for renewed growth and improved profitability over the long term.
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