Nike Q2 net income drops 32% amid higher North America tariffs

Core Insights - Nike reported Q2 fiscal 2026 revenues of $12.42 billion, a 1% increase on a reported basis, but flat on a currency-neutral basis [1] - Net income fell 32% to $792 million, with diluted earnings per share (EPS) at $0.53 [1] - Gross margin narrowed by 300 basis points to 40.6%, primarily due to increased tariffs in North America [1] Revenue Breakdown - Wholesale revenues increased 8% to $7.5 billion, driven mainly by growth in North America [2] - Nike Direct revenues declined to $4.6 billion, down 8% on a reported basis and 9% on a currency-neutral basis, reflecting a 14% drop in Nike Brand Digital sales [2] - Nike Brand revenues reached $12.1 billion, up 1% on both a reported and currency-neutral basis [2] Regional Performance - Gains in North America were partially offset by weaker performance in Greater China and the APLA region [3] - Converse revenues sharply declined to $300 million, down 30% on a reported basis and 31% on a currency-neutral basis [3] Cost and Inventory Management - Selling and administrative costs edged up 1% to $4.03 billion, with demand creation expenses increasing 13% to $1.3 billion [3] - Operating overheads fell 4% to $2.8 billion, mainly due to reduced wage-related and administrative costs [4] - Inventories as of November 30, 2025, were $7.7 billion, down 3% [4] Cash Flow and Financial Position - Cash, cash equivalents, and short-term investments stood at $8.3 billion, about $1.4 billion lower than the prior-year period [5] Management Commentary - Nike's CEO stated that the company is in the "middle innings of our comeback," focusing on realigning teams, strengthening partner relationships, and rebalancing the portfolio [6]