In its latest fiscal first-quarter earnings report, Nike exceeded analysts’ expectations with earnings per share (EPS) of $0.49 on revenue of $11.7 billion. This represents a 1% increase in revenue year-over-year, although the company’s net profit fell sharply by 31%, totaling $700 million. Analysts from Jefferies anticipated an EPS of $0.29 alongside revenue of approximately $11.2 billion, while Zacks Research predicted an EPS of $0.28 with $11 billion in sales. FactSet’s consensus estimate was closely aligned, forecasting an EPS of $0.27 on revenue of $11 billion, indicating a projected 5% decline in sales according to reports from Zacks and Barron’s.
The Nike Brand accounted for most of the revenue, generating $11.4 billion, which the company attributed to positive currency-neutral growth in North America, though this was tempered by a decline in Greater China. Nike Direct reported revenue of $4.5 billion, reflecting a 4% drop mainly due to a 12% decrease in Nike Brand Digital sales. Conversely, wholesale revenues saw a 7% increase, bringing in $6.8 billion, while revenue from the Converse brand experienced a significant 27% decline.
In a prepared statement, CEO Elliott Hill emphasized the company’s continued focus on core areas such as North America, Wholesale, and Running. He acknowledged the ongoing challenges and highlighted the need for the company to ensure consistent performance across all sports, geographic regions, and sales channels.
Nike’s gross margin also faced pressure, decreasing 320 basis points to 42.2%. This decline was primarily attributed to lower average selling prices influenced by increased discounts and higher tariffs in North America, although Jefferies had projected a more severe decline of 350 basis points. The company reported a 2% decrease in inventory, totaling $8.1 billion, influenced by rising product costs stemming from additional tariffs.
Jefferies had anticipated a modest growth trajectory for Nike, forecasting that the company would benefit from its innovative products and positive retail momentum, despite facing challenges such as tariffs and inventory issues. Matthew Friend, Nike’s CFO, commented that recovery within various sectors of the business is unlikely to follow a linear path, noting that different segments would bounce back at distinct rates.
Nike’s stock has faced a 22% decline over the past year, although it saw a slight uptick of less than 1% immediately after the earnings announcement. M Science analyst Drake MacFarlane remarked that the results reflect positive trends driven by improvements in North America and the wholesale sector, while also indicating that these gains have not negatively affected the recovery of the direct-to-consumer channel.
