In Q2 2025, NIKE Inc. reported a revenue decline of 8% year-over-year, reflecting ongoing challenges within its classic footwear franchises alongside broader market conditions. Despite these pressures, the company remains committed to revitalizing its brand and transforming operational strategies under newly reappointed CEO Elliott Hill.
Management outlined immediate actions to enhance product offerings, improve marketing engagement, and foster relationships with wholesale partners as key drivers of future growth. The focus on positioning sport at the core of NIKE's identity aims to reinvigorate both consumer engagement and profitability, amid a landscape characterized by competitive pressures and shifting consumer preferences.
Key Performance Indicators
Revenue
12.35B
QoQ: 6.60% | YoY:-7.72%
Gross Profit
5.39B
43.62% margin
QoQ: 2.51% | YoY:-9.75%
Operating Income
1.38B
QoQ: 14.47% | YoY:-24.16%
Net Income
1.16B
QoQ: 10.66% | YoY:-26.30%
EPS
0.78
QoQ: 11.43% | YoY:-25.00%
Revenue Trend
Margin Analysis
Key Insights
**Revenue:** $12.354 billion, down 8% YoY, impacted by franchise management actions.
**Gross Profit:** $5.389 billion with a margin of 43.6%, down from 44.6%. Higher markdowns and strategic pricing actions contributed to this decline.
**Operating Income:** $1.384 billion, yielding an operating margin of 11.2%, indicating a YoY decrease of 24.16%.
**Net Income:** $1.163 billion or $0.78 per diluted share, reflecting a 26.3% decline from the previous year.
### Key Financial Metrics
- Revenue: $12.354 billion, down 8% YoY, impacted by franchise management actions.
- Gross Profit: $5.389 billion with a margin of 43.6%, down from 44.6%. Higher markdowns and strategic pricing actions contributed to this decline.
- Operating Income: $1.384 billion, yielding an operating margin of 11.2%, indicating a YoY decrease of 24.16%.
- Net Income: $1.163 billion or $0.78 per diluted share, reflecting a 26.3% decline from the previous year.
### Cash Flow and Balance Sheet
- Net Cash Provided by Operating Activities: $1.049 billion, supporting robust operating cash flow.
- Cash at Period-End: $7.979 billion, alongside short-term investments of $1.782 billion, reflecting healthy liquidity.
- Total Assets: $37.959 billion vs. Total Liabilities: $23.922 billion, indicating a strong equity position with total stockholders' equity of $14.037 billion, translating to a debt-equity ratio of 0.860.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
12.35B
-7.72%
6.60%
Gross Profit
5.39B
-9.75%
2.51%
Operating Income
1.38B
-24.16%
14.47%
Net Income
1.16B
-26.30%
10.66%
EPS
0.78
-25.00%
11.43%
Key Financial Ratios
currentRatio
2.22
grossProfitMargin
43.6%
operatingProfitMargin
11.2%
netProfitMargin
9.41%
returnOnAssets
3.06%
returnOnEquity
8.29%
debtEquityRatio
0.86
operatingCashFlowPerShare
$0.71
freeCashFlowPerShare
$0.62
dividendPayoutRatio
47.9%
priceToBookRatio
8.34
priceEarningsRatio
25.18
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Management Insights
- Elliott Hill on Focus and Strategy: "We lost our obsession with sport. Moving forward, we will lead with sport and put the athlete at the center of every decision."
- Matt Friend on Revenue Guidance: "Our Q2 financial performance largely met our expectations, but revenues were down 8%, reflecting ongoing headwinds from our franchise management actions."
- Commitment to Brand: "We will reinvest in our brands to create stories that inspire and emotionally connect with our consumers during important sports moments."
### Themes from the Call:
1. Urgency in reinvigorating brand identity.
2. Commitment to innovation in product management.
3. Rebuilding relationships with wholesale partners as a core strategy.
"When Nike is at its best, we bring excitement. We invite consumers into the world of sport and sport culture."
â Elliott Hill
"We are absolutely committed to getting back to leading and growing a consumer-led marketplace."
â Elliott Hill
Forward Guidance
### Future Outlook
NIKE is pivoting towards a consumer-driven marketplace, aiming to revitalize sales and brand positioning over the next two years. Management has signalled potential revenue pressures in Q3 and Q4 due to ongoing inventory adjustments and transitional headwinds. However, strategic actions, including a shift to a full-price model for NIKE Direct, are expected to establish healthier margins and drive long-term profitability. Investors should look for signals of improved traffic and effective marketing campaigns in the upcoming quarters.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
NKE Focus
43.62%
11.20%
8.29%
25.18%
DECK
55.90%
23.30%
10.90%
25.04%
ONON
59.90%
8.33%
2.50%
90.89%
SKX
54.90%
9.57%
3.32%
18.35%
SHOO
40.50%
10.20%
4.38%
21.00%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Despite recent challenges, NIKE's strategic focus on sport, innovation, and engagement positions it for recovery. The emphasis on managing inventories more effectively and a shift back to full-price sales can stabilize margins in the longer term. However, investors should remain cautious during the transitional phase and monitor market reactions to upcoming marketing initiatives and product launches.
Key Investment Factors
Growth Potential
NIKE's focus on segmenting teams by product category and enhancing marketing narratives positions it well for growth in underperforming segments, notably running and basketball. Engagements during key sporting events and partnerships with athletes like Sabrina Ionescu aim to bolster brand visibility and relevance.
Profitability Risk
Transitioning to a consumer-centric model introduces risks associated with inventory management and the need for successful execution in marketplace strategies. A reliance on promotional sales could compress margins in the near term as the brand recovers.
Financial Position
NIKE's strong balance sheet with significant cash reserves enhances its ability to invest in reinvigoration strategies and absorb potential revenue downturns, all while maintaining a manageable level of debt.
SWOT Analysis
Strengths
Strong brand identity with global recognition.
Extensive distribution network across multiple channels.
Leadership in innovation through new product development.
Weaknesses
Recent declines in brand engagement and marketplace traffic.
Dependence on a narrow range of classic footwear products.
Opportunities
Expanding market share in emerging sports categories.
Leveraging digital platforms for enhanced customer experiences and sales.
Potential partnerships and endorsements with high-profile athletes.
Threats
Intense competition from established and new market players.
Economic slowdown impacting consumer spending in discretionary segments.