Nike — Financial Results

Revenue Dropped 10% as Nike Deliberately Cleared Excess Inventory

Nike intentionally pulled back supply of certain footwear — particularly older styles — and offered higher markdowns and discounts to clear shelf space for new products. This strategy hurt revenue across every channel and every major geography, but management views it as a necessary reset rather than an uncontrolled decline.

Profitability Fell Sharply: Net Income Down 44%

The revenue drop hit profits hard, amplified by gross margin (the percentage of revenue left after production costs) falling from 44.6% to 42.7%. The two main culprits were the heavy discounting used to clear inventory and a rise in inventory obsolescence reserves — essentially money set aside because some unsold product may never be sold at full price. Lower product and warehousing costs provided only partial relief.

Jordan Brand and Digital Were the Weakest Spots

Jordan Brand revenue fell 16% to $7.3 billion, making it the worst-performing product category. Meanwhile, Nike Brand Digital — the company's own apps and website — fell 20% to $9.6 billion. Nike is deliberately repositioning its digital platform away from discounting and back toward full-price selling, which is the right long-term move but creates near-term pain as traffic declines.

Greater China Is a Particular Problem Area

Greater China's gross margin fell by 420 basis points (a basis point is one-hundredth of a percent), the sharpest regional decline, driven by unfavorable currency moves and heavy inventory write-downs. Comparable store sales fell 7%, suggesting weak underlying consumer demand beyond just the inventory clean-up effort.

Tariffs Present a Real but Unquantified Risk for Fiscal 2026

Nike explicitly warns that new U.S. tariffs will cause a "material gross incremental increase" to its cost of sales in the year ahead. Since Nike manufactures most products overseas, tariffs directly raise the cost of each item it imports. Management is taking mitigating steps but has conceded that gross margin will be negatively impacted in fiscal 2026. The size of the hit is not yet specified.

Nike Is Spending More on Marketing While Cutting Overhead

Demand creation expense — covering advertising, sports sponsorships and athlete endorsements — rose 9% to $4.7 billion, a deliberate choice to rebuild brand momentum. At the same time, overhead fell 7%, partly due to restructuring charges taken in the prior year not repeating. This combination shows the company is cutting costs in some areas while leaning into brand investment.

Nike Returned $5.3 Billion to Shareholders but Slowed Buybacks

Nike paid out $5.3 billion through share repurchases and dividends in fiscal 2025, though it bought back fewer shares than in prior years ($3.0 billion worth at an average of $78.50 per share). Management says it intends to continue moderating buybacks, which signals it is preserving cash given weaker operating cash flows — down from $7.4 billion in fiscal 2024 to $3.7 billion in fiscal 2025. The company still held $9.2 billion in cash and short-term investments at year-end.