Nike (NKE) earnings Q2 2025

Nike’s The turnaround will take a little longer than expected under new chief executive Elliott Hill, who outlined his strategy to return the company to growth on Thursday after the retailer blamed deep discounting for falling revenue and profits.

The sneaker giant has relied on promotions to drive sales, and it plans to return its online business to a full-price model, but first it will have to aggressively liquidate old inventory through “less profitable channels,” said Hill and the chief financial officer. Matt friend.

“What I’ve seen is that traffic in Nike direct, digital and physical, has softened because we’re missing something new in the product and we’re not delivering inspiring stories,” Hill said. “The result is that we’ve become overly promotional… Within the year, our digital platforms delivered a 50/50 split of full-price promotional sales. The level of cutbacks is not only affecting our brand, but disrupting the overall marketplace and the profitability of our partners.”

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

While expectations were low for Nike’s latest quarter heading into Thursday’s release, the sneaker giant beat Wall Street expectations on the top and bottom lines.

Here’s how Nike fared accounting second quarter of 2025 compared to what Wall Street predicted, based on a survey of analysts from LSEG:

• Earnings per stock: 78 cents versus 63 cents expected
• Income: $12.35 billion vs. $12.13 billion

Nike shares initially rose after the results, but rallied after Hill made his opening remarks on a call with analysts.

Nike’s reported net income for the three-month period ended Nov. 30 fell to $1.16 billion, or 78 cents a share, compared with $1.58 billion, or $1.03 a share, a year earlier.

Sales fell to $12.35 billion, down about 8% from $13.39 billion a year earlier.

Hill, who started at Nike as an intern in the 1980s before leaving the company in 2020, is tasked with turning around the world’s largest sportswear company after it fell behind on innovation, ceded market share to competitors and botched its sales strategy.

“I have an irrational love for this company. I know Nike inside out, take pride in what the brand stands for and want to see the company succeed,” Hill said in his opening remarks to analysts. “At a moment when our team, brand and business are being challenged, my singular focus is to help get us back on track, to get back to winning.”

During his opening remarks, Hill delivered a resounding rebuke of the strategies that have come to define his predecessor John Donahoe’s tenure as CEO.

He said the company had spent too much of its resources driving online sales, paying for performance marketing and isolating wholesale partners — strategies he now plans to relax. He acknowledged that key wholesale partners feel Nike has turned its back on those partnerships and said the company is now working to rebuild their trust.

“We know our sales team will have to earn every ‘open to buy’ dollar, but we’re investing to make sure our partners feel supported,” Hill said. “We will do more than just sell in our products. We will actively support mutually profitable cross-selling. In short, we will win when our partners win.”

This is good news for partners like Foot Locker, JD Sports and Dick’s Sports Equipmentwhich rely on Nike products to drive sales.

Hill also mentioned a criticism that has swirled around Nike for the past few years: that the company lost sight of what had long defined the brand, the athletes and the performance, leading it to cede market share to competitors such as Asics, On Running and Hoka. .

“We lost our obsession with sports,” Hill said. “Dependence on a handful of sportswear silhouettes is not who we are.”

Hill appeared to be referring to the company’s earlier decision under Donahoe to focus growth on three key franchises — Air Force 1s, Dunks and Air Jordan 1s. For years, these lifestyle brands drove sales, but Nike made so many of the shoes that they became plain and bland. As a result, Nike is trying to cut back on supply, which they have said will affect sales in the short term, but hopefully not in the long term.

During the most recent quarter, Nike’s in-store and online sales fell 13%, while wholesale revenue fell 3%. The heavy discounting contributed to a 1 percentage point drop in gross margin, which came in at 43.6%, slightly better than the 43.3% StreetAccount analysts had expected.

Inventories, another area of ​​concern, were flat compared to a year earlier at $8 billion. Units increased, but this was offset by lower production costs and a shift in product mix.

Still, inventories were higher than the company wants them to be, especially given “recent sales trends,” Friend said.

While Nike saw sales decline in all four of its geographies, results were better than expected in all regions except China, where sales fell 8% to $1.71 billion, below the $1.75 billion StreetAccount had expected.

In North America, Nike saw sales of $5.18 billion, down 8% but ahead of the $5.01 billion Street Account had expected. In Europe, the Middle East and Africa, sales fell 7% to $3.30 billion, slightly above the $3.26 billion StreetAccount had expected. And in Asia Pacific and Latin America, sales fell 3% to $1.74 billion, ahead of the $1.62 billion analysts had expected.

Converse, which Nike bought in 2003, also dragged down the company’s overall performance, falling 17% in the period to $429 million, well short of the $462.6 million that analysts polled by StreetAccount had expected.

Nike’s shift away from Dunks and Air Force 1s, as well as its heavy discounts, have also had an impact Foot Lockerwhich missed Wall Street’s top- and bottom-line estimates in its third-quarter report Dec. 4 in part because of weak demand for Nike products, its CEO Mary Dillon told CNBC at the time.