10-QPeriod: Q2 FY2025

NIKE, Inc. Quarterly Report for Q2 Ended Nov 30, 2024

Filed January 3, 2025For Securities:NKE

Summary

NIKE, Inc. reported revenues of $12.35 billion 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% 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 $0.78, down from $1.03 in the prior year period.

Financial Highlights

47 data points
Beta

Revenue

$12.35B

43.6% Gross Margin

Net Income

$1.16B

9.4% Net Margin

EPS (Diluted)

$0.78

Total Assets

$37.96B

Cash & Equivalents

$7.98B

Free Cash Flow

$920.00M

Financial Statements
Beta
Revenue$12.35B
Cost of Revenue$6.96B
Gross Profit$5.39B
SG&A Expenses$4.00B
Net Income$1.16B
EPS (Basic)$0.78
EPS (Diluted)$0.78
Shares Outstanding (Basic)1.49B
Shares Outstanding (Diluted)1.49B

Key Highlights

  • 1Total revenues decreased by 8% to $12.35 billion in Q2 FY25 compared to $13.39 billion in Q2 FY24.
  • 2Gross 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.
  • 3NIKE Direct revenues fell 13% to $5.0 billion in Q2 FY25, with NIKE Brand Digital sales down 21% on a currency-neutral basis.
  • 4Wholesale revenues saw a 3% decrease on a reported basis (4% currency-neutral) in Q2 FY25.
  • 5Demand creation expenses increased by 1% in Q2 FY25, reflecting investments in sports marketing, while operating overhead expenses decreased by 5%.
  • 6The company returned approximately $1.6 billion to shareholders in Q2 FY25 through share repurchases and dividends.
  • 7EBIT 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%.

Frequently Asked Questions

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.

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.

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.

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.