What drove the decrease in gross margin?

The gross margin decreased by 320 basis points to 42.2% primarily due to lower NIKE Brand Average Selling Prices (ASP), which reduced gross margin by approximately 250 basis points. This was largely driven by higher discounts and an unfavorable channel mix. Additionally, higher NIKE Brand product costs, attributed to new tariffs in North America, decreased gross margin by approximately 100 basis points. A lower gross margin from Converse also contributed.

Why did NIKE Direct revenues decline?

NIKE Direct revenues decreased by 4% on a reported basis (5% currency-neutral) to $4.5 billion. This decline was primarily driven by a 12% decrease in NIKE Brand Digital sales, which fell from $2.3 billion to $2.0 billion. Sales in NIKE-owned stores also decreased by 1%, with comparable store sales declining by 1%.

What is NIKE's strategy regarding inventory and pricing?

NIKE is implementing strategies to rebalance its business, which include repositioning NIKE Brand Digital as a full-price platform and reinvesting in wholesale distribution. This involves liquidating excess inventory through increased markdowns across NIKE Direct and higher sales returns and discounts with wholesale partners. While these actions are expected to negatively impact revenues and profitability in the short term, the company believes they are necessary to reduce inventory, create capacity for new products, reignite brand momentum, and ultimately drive long-term shareholder value.

How did currency fluctuations impact the results?

On a currency-neutral basis, NIKE, Inc. revenues decreased by 1%, indicating that reported revenue growth was slightly positive due to favorable currency movements. However, the overall impact of currency on the income statement was mixed, with certain expenses like demand creation and operating overhead increasing due to unfavorable currency changes. The company actively uses derivative instruments to manage foreign currency exposures.

NKE 10-Q Quarterly Report Q1 FY2026 — Revenue, Net Income, EPS

Summary

NIKE, Inc. reported revenues of $11.72 billion for the first quarter of fiscal 2026, a slight increase of 1% from $11.59 billion in the prior year period. However, on a currency-neutral basis, revenues decreased by 1%. The company experienced a notable decline in gross margin, down 320 basis points to 42.2% compared to 45.4% in the prior year. This was driven by increased discounting, higher product costs due to tariffs, and unfavorable channel mix. Net income saw a significant decrease of 31% to $727 million, down from $1.05 billion in the same period last year, resulting in diluted earnings per share of $0.49, a 30% drop from $0.70. The company is actively managing inventory and pricing strategies, including increased markdowns in certain channels and reinvestment in wholesale distribution, which are expected to impact revenues and profitability in the near term but are intended to support long-term shareholder value. Cash flow from operations also decreased, reflecting lower net income and changes in working capital.

Financial Highlights

47 data points

Beta

Revenue

$11.72B

0.4% Gross Margin

Net Income

$727.00M

0.1% Net Margin

EPS (Diluted)

$0.49

Total Assets

$37.33B

Cash & Equivalents

$7.02B

Free Cash Flow

$15.00M

Financial Statements

Beta

Revenue	$11.72B
Cost of Revenue	$6.78B
Gross Profit	$4.94B
SG&A Expenses	$4.02B
Net Income	$727.00M
EPS (Basic)	$0.49
EPS (Diluted)	$0.49
Shares Outstanding (Basic)	1.48B
Shares Outstanding (Diluted)	1.48B

Key Highlights

1Total revenues grew 1% to $11.72 billion, but declined 1% on a currency-neutral basis.
2Gross margin contracted significantly by 320 basis points to 42.2%, impacted by higher discounts and tariffs.
3Net income fell 31% to $727 million, and diluted EPS decreased 30% to $0.49.
4NIKE Direct revenues decreased 4% (5% currency-neutral), driven by lower NIKE Brand Digital sales.
5NIKE Brand wholesale revenues increased 7% (5% currency-neutral), indicating a strategic shift.
6Inventories increased 8% sequentially to $8.1 billion.
7The company returned approximately $0.7 billion to shareholders through dividends and share repurchases, though share repurchases were moderated.

NIKE, Inc. Quarterly Report for Q1 Ended Aug 31, 2025

Summary

Financial Highlights

Key Highlights

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