Q2 2025 Summary
Published Feb 7, 2025, 7:58 PM UTC- Nike is accelerating strategic actions in key markets like North America and Greater China, with confidence in new leadership and ability to execute aggressive actions to drive growth.
- The company is rebuilding strong relationships with wholesale partners, delivering innovative products and mutually profitable growth, with positive reception from partners.
- Nike is confident in its upcoming product pipeline and innovation, particularly in running and basketball, expected to drive growth and offset pressures from repositioning the business.
- Nike expects significant near-term revenue and margin headwinds due to restructuring and repositioning actions, with revenues projected to decline low double digits in Q3 and even greater headwinds anticipated in Q4 across revenue, margin, and demand creation expenses.
- The acceleration of reducing inventory in classic footwear franchises is causing greater sales deceleration, particularly impacting NIKE Digital, and there is uncertainty about when new innovative products will reach sufficient scale to offset this pressure, potentially leading to continued sales declines into fiscal 2026.
- Increased competition in key markets like Greater China, from both international and local players, along with a promotional environment, may hinder Nike's ability to return to growth in these regions, adding to the company's challenges in reenergizing brand momentum.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | **-8% ** | Driven by lower consumer demand in key markets, strategic supply constraints on classic footwear franchises, and a promotional environment in Greater China. |
Operating Income | **-28% ** | Revenue declines combined with higher SG&A (including promotions) outweighed moderate gross margin improvements from prior pricing actions. |
Net Income | **-26% ** | Downward pressure from reduced revenue, a higher effective tax rate (19.6% vs. 12% prior year), and elevated promotional costs weighed on profitability. |
NIKE Brand | **-7% ** | Softness in Jordan and classic franchises, plus traffic headwinds in North America and Greater China, overshadowed smaller category gains. |
Converse | **-17% ** | Lower DTC traffic, higher discounting, and wholesale declines in Western Europe and Asia drove the shortfall. |
Equipment | **+15% ** | Strong demand in North America (+34%) and Greater China (+28%) offset softness in EMEA, aided by product innovation and price actions. |
North America | **-8% ** | Elevated inventory necessitating promotions, strategic brand supply cuts in classics, and lower wholesale volumes drove revenue down. |
Greater China | **-8% ** | Digital sales fell 34% with reduced store traffic, and the Jordan Brand underperformed amid macro softness, contributing to the overall decline. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q3 2025 | no prior guidance | down low double digits | no prior guidance |
Gross Margins | Q3 2025 | no prior guidance | decline by ~300 to 350 bps | no prior guidance |
SG&A | Q3 2025 | no prior guidance | slightly down year-over-year | no prior guidance |
Other Income & Expense | Q3 2025 | no prior guidance | $30 million to $40 million | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue (YoY %) | Q2 2025 | Expected to decline 8% to 10% | Declined ~7.7% year-on-year (13,388In Q2 2024 vs. 12,354In Q2 2025) | Beat |
Gross Margin (YoY bps) | Q2 2025 | Expected ~150 bps decline | Declined ~90 bps (44.6% in Q2 2024 vs. 43.7% in Q2 2025; Q2 2024 Revenue 13,388, COGS 7,417; Q2 2025 Revenue 12,354, COGS 6,965) | Beat |
SG&A (YoY change) | Q2 2025 | Expected roughly flat | Decreased 3.4% year-on-year (4,146In Q2 2024 vs. 4,005In Q2 2025) | Beat |
Effective Tax Rate | Q2 2025 | Expected high teens | Approximately 17.9% (Operating Income 1,392– Interest Expense -24≈ 1,416 EBT, Net Income 1,163⇒ 1,163 / 1,416 = 17.9%) | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
New Product Innovation | Consistently cited in Q1, Q4, and Q3 2025 as a key growth driver, highlighting accelerated pipelines and scaling newness. | Nike continues to emphasize new product innovation, focusing on five core sports categories, shifting shelf space from classic franchises to foster growth. | Consistent, remains central to brand differentiation and future expansion. |
Greater China Sentiment | Previously showed mixed performance. Q1 and Q4 2025 discussed promotional challenges; Q3 2024 noted share gains and optimism. | Facing headwinds with retail traffic declines and promotional pressures, but certain new products show strong local demand. | Shifted from confident growth to cautious optimism amidst a tough macro environment. |
Wholesale Channel Relationships | Q1 2025 acknowledged missteps in over-reliance on DTC and described efforts to re-energize wholesale channels; Q4/Q3 2024 noted growth but fewer details on rebuilding. | Rebuilding trust by collaborating more closely with partners, reclaiming shelf space through innovation and storytelling. | Improving, with a renewed focus on mutual profitability and strategic alignment. |
Digital Sales Declines | Consistent references to double-digit declines in earlier quarters (Q1, Q4, Q3) stemming from franchise lifecycle management and traffic softness. | NIKE Digital sales declined 21%, driven by faster deceleration of classic franchises and a full-price strategy. | Prolonged challenges due to reduced promotions and franchise pullback. |
Classic Footwear Franchises | Discussed in Q1, Q4, and Q3 2025 as a deliberate supply reduction, creating short-term revenue headwinds while prioritizing long-term brand health. | Continues to phase out reliance on older franchises, accelerating deceleration faster than the overall business. | Ongoing reduction to emphasize new franchises and innovation. |
Repositioning with Sport Focus | Q1, Q4, Q3 2025 highlighted organizational realignment around sports categories, brand campaigns, and innovation showcases (e.g., Olympics). | Putting athletes and sport at the core of the brand strategy, investing in product storytelling and reducing promotional reliance. | Expanded emphasis on athlete insights, deepening authenticity for sustained growth. |
Revenue and Margin Pressures | Previously noted elevated inventory levels and aggressive promotions in Q1, Q4, and Q3 2025, weighing on margins. | Experiencing near-term headwinds from inventory liquidation and channel repositioning; margins projected to drop by 300–350 bps. | Persisting short-term challenges as the marketplace resets. |
Long-Term Growth Strategy | Reinforced across all prior quarters, with a focus on scaling newness, brand building, and selective distribution for sustainable growth. | Continues to pursue innovation, wholesale partnerships, and market share gains even amid short-term pressures. | Steadfast, emphasizing balanced expansion and brand elevation. |
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Sales Impact and New Product Timing
Q: How will new products offset sales pressure in 2026?
A: Elliott Hill acknowledged that accelerating lifestyle initiatives may pressure 2026 sales but expressed confidence in upcoming products. He highlighted excitement about new offerings in running, training, and sportswear, which are expected to gain sufficient scale to offset pressures as they reach the market in fall '25. Cross-functional teams are effectively bringing innovative products to market, which is the quickest path to returning to health. -
Margin Prioritization Over Sales
Q: Are you focusing on margins before sales, even if sales decline?
A: Elliott Hill confirmed a focus on achieving healthy margins before driving top-line growth. He emphasized the importance of innovation at scale to replace liquidated products by fall next year. Matthew Friend added that while revenues are expected to be down low double digits and margins down 300 to 350 basis points in Q3, these actions are aimed at returning to a full-price business, which is foundational for future growth. -
Near-Term Actions for Long-Term Gain
Q: Will you take short-term hits to ensure long-term success?
A: Elliott Hill stated they are acting with a sense of urgency, investing in product innovation, marketing, and marketplace management despite near-term challenges. He believes these moves are necessary to drive the brand forward. Matthew Friend explained that while there are near-term headwinds due to repositioning, they expect these to end as they recalibrate channels and product portfolio, leading to future opportunities once actions are completed. -
Regional Strategies: North America and China
Q: What specific actions are planned for North America and China?
A: In North America, a new leader, Tom , is aggressively working on marketplace cleanup, rebuilding wholesale relationships, and elevating NIKE Direct starting in January. In China, they are investing in local product innovation via the Geo Express Lane and the NIKE Sports Research Lab, focusing on creating products "of China for China." They are also resetting consumer-led concepts to drive performance and productivity, partnering closely with Topsports and Pou Sheng. -
Inventory Realignment and Growth Timeline
Q: What's the timeline to realign inventory and return to growth?
A: Elliott Hill emphasized a focus on five key fields of play—running, basketball, football, training, and sportswear—segmented by men's, women's, and kids'. While not specifying an exact timeline, he expressed excitement about the merchandising opportunities these areas present and indicated that they are a near-term focus, which will unlock incremental growth moving forward. -
Margin Recapture and Efficiency Opportunities
Q: How will you improve margins and efficiency?
A: Elliott Hill mentioned appointing Venki as Chief Supply Chain Officer to focus on opportunities for margin expansion across factories, transportation, and logistics. Matthew Friend noted that restoring a higher percentage of full-price sales—moving away from the current 50% off-price mix—will significantly improve profitability, especially within NIKE Direct. They are also working to reduce fulfillment costs and rely less on paid media by leveraging brand investments to drive organic traffic. -
Investment Phasing and Cost Management
Q: How are you pacing investments to return to growth?
A: Elliott Hill outlined plans to shift dollars from performance marketing to brand marketing, investing in key "fields of play" and focusing on five sports and three key countries. Matthew Friend added that despite SG&A being down 3%, demand creation is up 1%, reflecting prioritized investments. They are also making meaningful investments to clean up the marketplace, including liquidating inventory and planning for markdowns, which are reflected in their Q3 guidance and expected to continue in the near term.