NIKE (NYSE:NKE) executives struck an upbeat but measured tone on the company’s second quarter fiscal 2026 earnings call, describing results as “slightly better” than management expected 90 days ago while emphasizing that the turnaround remains in the “middle innings,” with progress varying by geography, brand, and channel.
Management frames progress under “Win Now” and “Sport Offense”
President and CEO Elliott Hill said fiscal 2026 remains focused on actions to “right-size” Nike’s Classics business, return Nike Digital to a “premium experience,” diversify the product portfolio, deepen consumer connections, strengthen partner relationships, and realign teams and leadership. Hill described the company’s “Win Now Actions” as the immediate response to key challenges, with the “Sport Offense” serving as an accelerator that moves athlete-centered innovation through countries and channels.
- Sport Offense execution: Teams are gaining traction, particularly in performance, even as Classics are reduced.
- Healthier base for growth: The Nike brand grew, wholesale rose 8%, and Nike reduced promotional days while elevating Nike stores and Nike.com.
- Different speeds across the comeback: North America is leading, while Greater China remains the top lagging area.
Hill also announced a leadership change: all geographies will now report directly to him. He said the shift is intended to speed decisions and allow geography general managers to more directly shape strategy and influence investments. Separately, Hill said Venkatesh Alagirisamy has been appointed Chief Operating Officer, with a mandate to improve end-to-end efficiency across planning, creation, manufacturing, delivery, and selling.
Quarterly results: wholesale growth offsets digital declines
EVP and CFO Matt Friend said second quarter results showed “modest” year-over-year reported revenue growth despite headwinds from actions taken to reposition the business. Revenues were up 1% on a reported basis and flat on a currency-neutral basis.
By channel, Nike Direct fell 9%, driven by a 14% decline in Nike Digital and a 3% decline in Nike Stores. Wholesale increased 8%.
Friend noted that results included a roughly $550 million revenue headwind from the reduction of classic franchises, which were down more than 20% versus the prior year. Excluding that headwind, Friend said currency-neutral revenue grew 6%.
Profitability was pressured. Gross margin declined 300 basis points to 40.6%, primarily due to higher product costs related to tariffs in North America and inventory obsolescence in Greater China that was not anticipated 90 days earlier. SG&A rose 1% year over year, driven by higher brand marketing expense, partially offset by lower operating overhead; Friend said SG&A came in lower than expected due to overhead savings. Effective tax rate was 20.7% versus 17.9% a year ago, and earnings per share were $0.53.
Inventory decreased 3% year over year, with units down high single digits. Friend said North America and EMEA—nearly three-quarters of the business—have returned to a “healthy marketplace,” while work remains in Greater China, parts of APLA, and Converse.
Geographies: North America leads; China reset continues
North America again stood out. Revenue grew 9%, with wholesale up 24% while Nike Direct declined 10% (Nike Digital down 16%; Nike Stores down 2%). EBIT declined 8% on a reported basis. Friend said the quarter benefited in part from liquidation to value channels as Nike cleaned up the marketplace, but also reflected balanced growth from both new and existing partners. Nike.com posted its “best Black Friday ever,” helped by sell-through of the Jordan Black Cat launch, according to Friend.
Product trends in North America were led by Running, Kids, Basketball, and Training, with Sportswear showing sequential improvement to low-single-digit growth as classic footwear franchises declined about 20%. Friend also pointed to margin dynamics: North America gross margin fell 330 basis points despite a 520 basis point impact from new U.S. tariffs, which he said supported confidence that the company’s actions are working.
EMEA revenue decreased 1% (Nike Direct -3%, wholesale flat), and EBIT declined 12%. Friend said promotional activity in the region was heavier than expected, with growth in Central and Eastern Europe and the Middle East offset by slight declines in Western Europe. Running grew double digits, and Sportswear growth was driven by apparel.
Greater China remained the most challenged region. Revenue fell 16% (Nike Digital -36%, wholesale -15%), and EBIT declined 49% on a reported basis. Friend described a cycle of declining traffic, softer sell-through, and aged inventory that pushed the business toward off-price selling and eroded premium positioning, particularly in digital. Actions in the quarter included being less promotional during 11/11 (with Nike Digital down about 35% year over year in line with plans), accelerating returns of aged partner inventory, writing off partner and Nike inventory, reducing Nike inventory by mid-teens (and down 20% in units), and lowering sell-in plans for spring while cutting summer buys to improve sell-through and full-price realization.
Hill said Nike had “become a lifestyle brand competing on price” in China and reduced “feet on the ground,” while underinvesting in retail presentation in a monobrand environment with thousands of doors. He said early results from an initial Nike Store pilot were encouraging but not moving fast enough, and that Nike is working with partners including Pou Sheng and Top Sports to adapt its approach.
APLA revenue declined 4% (Nike Direct -5%, wholesale -3%), and EBIT declined 15%. Friend said Latin America was positive but more than offset by Asia-Pacific headwinds, and the region used promotions to address pockets of excess inventory.
Product pipeline and brand initiatives highlighted
Hill repeatedly emphasized that growth will be driven by sport and innovation. He said Running grew more than 20% for the second consecutive quarter, with double-digit growth in every channel, including Nike Direct. He also outlined upcoming launches and initiatives discussed on the call, including Structure Plus in January, “Nike Mind” (a new footwear platform for preparation), and the Therma-FIT Air Milano jacket debuting at the Winter Olympics in February.
In football, Hill said wholesale partners were “very confident” and that booking units are nearly 40% higher than for World Cup 2022. He said Nike plans to refresh more than 100 Nike Direct doors and 1,400 partner doors globally, alongside significant marketing investment. Hill also said the NikeSKIMS collection is set to launch internationally in EMEA and APLA following what he described as a successful rollout in North America.
Guidance: Q3 revenue expected down low single digits; tariffs remain a headwind
For the third quarter, Friend said Nike expects revenues to be down low single digits, with modest growth in North America and performance in Greater China and Converse similar to Q2. The outlook includes an estimated three-point benefit from foreign exchange.
Gross margin is expected to be down about 175 to 225 basis points in Q3, including a 315 basis point impact from higher product costs tied to new tariffs. Excluding tariffs, Friend said gross margin expansion would be positive in the third quarter.
Friend reiterated that Nike is navigating both transitory and structural margin headwinds, including $1.5 billion of annualized incremental product costs from higher U.S. tariffs—estimated to be a 320 basis point gross margin headwind in fiscal 2026, with actions underway to reduce the net impact to about 120 basis points.
On questions about longer-term targets and timing for a return to double-digit EBIT margins, management said it sees a path back but emphasized the need to remain flexible in a dynamic environment. Hill said margin expansion is a “top priority,” and Friend said the path begins with growth, improved full-price mix, supply chain leverage as volumes increase, and continued operating overhead discipline while maintaining demand creation investment.
About NIKE (NYSE:NKE)
Nike, Inc (NYSE: NKE) is a global designer, marketer and distributor of athletic footwear, apparel, equipment and accessories. Founded in 1964 as Blue Ribbon Sports by Phil Knight and Bill Bowerman and renamed Nike in 1971, the company is headquartered near Beaverton, Oregon. Nike develops and commercializes products across performance and lifestyle categories for sports including running, basketball, soccer and training, and is known for signature technologies and design-driven product lines.
The company markets products under several primary brands, including Nike, Jordan and Converse, and sells through a combination of wholesale relationships, branded retail stores and direct-to-consumer channels such as company-operated stores and digital platforms (e.g., Nike.com and mobile apps).
