Mixed results as turnaround strategy plays out
Nike beat Wall Street expectations in its fiscal first quarter, posting $11.72 billion in revenue compared to the anticipated $11.0 billion. Earnings per share also outperformed estimates, landing at 49 cents versus the projected 27 cents. However, the company’s net income dropped sharply to $727 million, a 31% decrease from the $1.05 billion reported in the same period last year.
Despite the modest 1% increase in revenue, Nike’s gross margin fell 3.2 percentage points to 42.2%. The decline highlights the ongoing challenges in clearing aging inventory, which continues to weigh on profitability. CFO Matt Friend cautioned that recovery across business segments would not follow a straight line.
Key growth pockets in wholesale and North America
CEO Elliott Hill noted progress in three areas: wholesale, running, and North America. Wholesale revenue rose 7% to approximately $6.8 billion, while North American sales climbed 4% to $5.02 billion — exceeding analyst expectations. Hill emphasized that while some areas are gaining traction, others still face headwinds.
China, one of Nike’s most critical markets, reported a 9% drop in revenue. Direct sales also declined by 4% to $4.5 billion. Meanwhile, inventories fell 2% year over year, though higher tariffs increased product costs, offsetting some of the unit volume reduction.
Strategic changes and restructuring underway
Since taking over from John Donahoe, Hill has pushed to overhaul Nike’s strategy. This includes revamping corporate structure by reorganizing teams around sports categories instead of demographics, a shift intended to refocus on Nike’s athlete consumer base. In late August, Nike began implementing this change, including a 1% staff reduction and internal role transitions completed by September 21.
The effort to refresh Nike’s product line and eliminate old inventory has led to heavier discounting and use of lower-margin sales channels — necessary moves that have strained short-term profits but are considered vital for long-term recovery.
Women’s market and Skims collaboration
A key part of Hill’s growth plan is expanding Nike’s presence in the women’s market. The recent launch of NikeSKIMS, a collaboration with Kim Kardashian’s shapewear brand, is part of that push. Originally planned for a spring debut, the collection officially launched last week. Investors are eager to see how the partnership performs and its potential impact on future revenue.
Nike has promised more insights into its progress during its earnings call with analysts. The focus remains on executing its multi-front strategy — realigning teams, refreshing products, and rebuilding its brand — while navigating macroeconomic pressures and shifting consumer demand.
