01—Abstract
Summary
Summary of the 10-Q filed January 3, 2025. Cited figures are marked; the original filing is the authoritative source.
NIKE, Inc. reported revenues of $12.35 billiona for the second quarter of fiscal year 2025, a decrease of 8% from $13.39 billion in the prior year period.
This decline was primarily driven by lower revenues across key geographic segments including North America, Europe, Middle East & Africa, and Greater China, as well as a significant 18%b drop in Converse sales. The company experienced a broad-based revenue decrease across both wholesale and Direct-to-Consumer channels, with NIKE Direct revenues falling 13% year-over-year. Despite the revenue decline, NIKE has strategically increased investments in demand creation and brand marketing to support new product launches and key sporting events.
The company is also actively managing inventory through increased discounts and promotional activity, which has impacted gross margin. Management emphasizes that these strategic actions, while impacting short-term financial results, are intended to reposition the business for long-term profitable growth and shareholder value. Diluted earnings per share for the quarter were $0.78c, down from $1.03 in the prior year period.
02—Key points
Key Highlights
- Total revenues decreased by 8% to $12.35 billion in Q2 FY25 compared to $13.39 billion in Q2 FY24.
- Gross margin declined by 100 basis points to 43.6% in Q2 FY25, primarily due to higher discounts and unfavorable channel mix, partially offset by lower product input and logistics costs.
- NIKE Direct revenues fell 13% to $5.0 billion in Q2 FY25, with NIKE Brand Digital sales down 21% on a currency-neutral basis.
- Wholesale revenues saw a 3% decrease on a reported basis (4% currency-neutral) in Q2 FY25.
- Demand creation expenses increased by 1% in Q2 FY25, reflecting investments in sports marketing, while operating overhead expenses decreased by 5%.
- The company returned approximately $1.6 billion to shareholders in Q2 FY25 through share repurchases and dividends.
- EBIT decreased by 27% to $1.39 billion in Q2 FY25 compared to $1.90 billion in Q2 FY24, impacting the EBIT margin which fell to 11.3% from 14.2%.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2025filed January 3, 2025Financial Statements
Q2 FY2025 against Q2 FY2024
| Line item | Q2 FY2025Q2 FY2024 | Change |
|---|---|---|
| Revenue | $12.35B$13.39B | −7.7% |
| Cost of Revenue | $6.96B$7.42B | −6.1% |
| Gross Profit | $5.39B$5.97B | −9.7% |
| SG&A Expenses | $4.00B$4.15B | −3.4% |
| Net Income | $1.16B$1.58B | −26.3% |
| EPS (Basic) | $0.78$1.04 | −25.0% |
| EPS (Diluted) | $0.78$1.03 | −24.3% |
| Shares Outstanding (Basic) | 1.49B1.52B | −2.2% |
| Shares Outstanding (Diluted) | 1.49B1.53B | −2.7% |
05—Questions
Frequently Asked Questions
What is the primary reason for the decrease in NIKE's revenue?
The primary reason for the revenue decrease is attributed to lower wholesale shipments, increased sales-related reserves, a decrease in traffic, and elevated promotional activity across NIKE Direct. These factors led to a decline in revenues across major geographic segments, including North America, EMEA, and Greater China, as well as a significant drop in Converse sales.
How is NIKE managing its inventory and what is the impact on gross margin?
NIKE is actively managing inventory by reducing the supply of certain footwear products, repositioning NIKE Brand Digital as a full-price platform, and reinvesting in wholesale distribution. This includes liquidating inventory through increased markdowns across NIKE Direct and higher sales-related returns and discounts with wholesale partners. These actions, coupled with higher discounts and changes in channel mix, have led to a 100 basis point decrease in gross margin to 43.6% in the second quarter.
What is the company's strategy moving forward, and what are the expected impacts?
Under new CEO Elliott Hill, NIKE is focused on leading with sport, building a complete product portfolio, creating inspiring stories for consumers, repositioning NIKE Brand Digital as a full-price platform, and increasing investment with wholesale partners. The company anticipates that these strategic actions will negatively impact revenues and gross margin in the near term, along with higher demand creation expenses, but believes they will ultimately reposition the business for long-term shareholder value.
How did currency fluctuations affect NIKE's results?
For the second quarter, NIKE, Inc. revenues decreased 8% on a reported basis and 9% on a currency-neutral basis, indicating a significant impact from foreign currency fluctuations, though the overall trend was negative even when excluding currency effects. For the six-month period, the revenue decline was also 9% on both a reported and currency-neutral basis. The company uses hedging strategies to mitigate some of these impacts.
06—Continue