Financial Data and Key Metrics - Q2 revenues were down 8% on a reported basis and down 9% on a currency-neutral basis, reflecting ongoing headwinds from franchise management actions [31] - Gross margins declined 100 basis points to 43.6% due to higher markdowns on NIKE Direct, wholesale discounts, and channel mix headwinds, partially offset by lower product costs and strategic pricing actions [31] - Earnings per share was $0.78 [31] - NIKE Direct declined 14%, with NIKE Digital down 21% and NIKE Stores down 2%, while wholesale was down 4% [31] - Inventory was flat versus the prior year, with footwear inventory declining and apparel and accessories inventory increasing [33] Business Line Performance - Sport performance field of play grew year-over-year, offset by a double-digit decline in sportswear [35] - Training: men's up high teens, women's up high single-digits, kids up high single-digits [35] - Global Football: men's grew low single-digits, kids grew high teens [35] - Basketball: women's grew strong double-digits, kids grew low teens [35] - Running: men's was flat, women's up low to mid-single digits [36] - Classic footwear franchises decelerated faster than the overall business, with a greater rate of decline in Q2 compared to Q1 [36] Market Performance - North America: Q2 revenue down 8%, NIKE Direct declined 15%, wholesale declined 1%, EBIT declined 10% [37] - EMEA: Q2 revenue declined 10%, NIKE Direct declined 20%, wholesale declined 4%, EBIT declined 10% [39] - Greater China: Q2 revenue declined 11%, NIKE Direct declined 7%, wholesale down 15%, EBIT declined 27% [40] - APLA: Q2 revenue down 2%, NIKE Direct declined 4%, wholesale declined 1%, EBIT declined 12% [41] Strategic Direction and Industry Competition - The company is shifting focus back to sport, leveraging athlete insights to accelerate innovation, design, and product creation [13] - Investments will be rebalanced to empower local teams and create stronger consumer connections in key countries and cities [14] - The company plans to elevate NIKE Direct as a premium destination, focusing on full-price sales and reducing promotional activity [25] - The company is committed to rebuilding trust with key wholesale partners by delivering innovative products and supporting their businesses [26] Management Commentary on Operating Environment and Future Outlook - The company is taking a long-term view, making decisions that prioritize the health of the brand and business, even if they negatively impact near-term results [29] - The company expects Q3 revenues to be down low double-digits, with gross margins down 300-350 basis points, reflecting actions to clean and reset the marketplace [46] - The company is accelerating actions to reposition the business, including reducing promotional activity, liquidating excess inventory, and increasing brand marketing [43][44] Other Important Information - The company is focusing on five key sports: running, basketball, training, football, and sportswear, with a segmented approach by men's, women's, and kids [61] - The company is investing in sports marketing, with recent long-term partnership extensions with the NFL, NBA, WNBA, and Brazil Football Confederation [62] Q&A Session Summary Question: How is the company planning to rebuild relationships with retail partners and regain shelf space? - The company is committed to leading a consumer-led marketplace, delivering innovative products, and supporting wholesale partners to drive mutually profitable growth [54][55] Question: What are the key investments being made to return the brand to growth? - The company is focusing on sport-led product innovation, increasing brand marketing, and empowering local teams in key countries and cities [60][61] Question: How will the company manage near-term financial pressures while making long-term investments? - The company is prioritizing margin health over sales growth in the near term, with actions to clean up inventory and reposition the marketplace expected to create short-term headwinds [71][76] Question: What is the timeline for returning to sustainable, profitable growth? - The company expects to see the impact of its actions over the next 18-24 months, with a focus on returning to a healthy, full-price marketplace and driving long-term growth [80][84] Question: What are the specific actions being taken in North America and Greater China? - In North America, the company is resetting NIKE Direct, investing in running specialty, and leveraging key sports moments to drive growth [96] - In Greater China, the company is focusing on product innovation, local product creation, and resetting the marketplace to drive long-term growth [98]
NIKE(NKE) - 2025 Q2 - Earnings Call Transcript