Please refer to Nike's earnings press release or Nike's website, investors.nike.com, for comparable GAAP measures and quantitative reconciliations. All growth comparisons on the call today are presented on a year-over-year basis and are currency-neutral unless otherwise noted. Since my return, not a day has gone by that I haven't asked each of my teammates to commit themselves fully to building a better Nike. It's an immersive sport experience, and the refresh has already led to double-digit revenue increases.
With Converse, we just put new leadership in place, and we're going to take aggressive actions to better position the brand for profitable growth in the future. Last, I will provide guidance for Q2, as well as some additional insights to bring shape to our near-term financial performance. Gross margins declined 320 basis points to 42.2% on a reported basis due to higher wholesale discounts, higher discounts in our Nike factory stores, increased product costs, including new tariffs, and channel mix headwinds. North America is furthest ahead in taking steps to elevate and transform the marketplace for future growth.
Sportswear grew in the quarter, but there is still work to do, with momentum in apparel and looks of running footwear, while managing a 30% decline in our classic footwear franchises. As it relates to the North America marketplace, wholesale returned to growth in the quarter, partially due to shipment timing in the prior year, as well as higher liquidation volume to value channels. Additionally, the strategic actions taken to expand distribution and reach new consumer segments contributed to growth and are showing initial promise. Headway was also made in repositioning Nike Digital, reducing the number of days of site-wide promotion by more than 50% and lowering markdown rates, as well as increasing share of demand at full price.
| Metric | Period | Current guidance |
|---|---|---|
| Revenue | Q2 FY2026 | Down low single digits, including one point of FX benefit (Sequential decline driven by Digital comparisons and Dunk actions) |
| Gross margin | Q2 FY2026 | Down approximately 300-375 basis points, including 175 bps net tariff headwind (Higher tariff impact than Q1) |
| Gross incremental tariff cost | FY2026 annualized | Approximately $1.5 billion (Up $500 million on new reciprocal rate increases) |
| Net tariff gross margin impact | FY2026 | Approximately 120 basis points (Increased on magnitude and timing of recent rate hikes) |
| SG&A dollars | Q2 FY2026 | Up high single digits (Acceleration of demand creation plus low single-digit operating overhead increase) |
| Tax rate | Q2 and full year FY2026 | Low 20% range (Due to anticipated changes in earnings mix) |
| Wholesale revenue | FY2026 | Return to modest growth (Spring order book up versus prior year) |
| Nike Direct | FY2026 | Not expected to return to growth (Organic traffic continues to decline double digits) |
| Metric | YoY | Note |
|---|---|---|
| Total revenue | Up 1% reported, down 1% currency-neutral | Wholesale growth of 5% offsetting Nike Direct decline of 5% |
| Gross margin | Down 320 bps to 42.2% | Higher wholesale and factory store discounts, increased product costs including new tariffs, and channel mix |
| Nike running | Up over 20% | Sport Offense redesign of core silos around athlete insights with strong sell-through |
| North America revenue | Up 4% (wholesale up 11%) | Sustained brand activity across sport, expanded distribution, and shipment timing |
| Greater China revenue | Down 10% | Seasonal sell-through underperforming plans and declining store traffic in a structurally different marketplace |
| Nike Direct | Down 5% (Digital down 12%) | Strategic reduction in promotion and paid media as the channel is repositioned to full price |
| Earnings per share | $0.49 | Reported result for the quarter |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Sport Offense | Announced in Q4, organized by men's/women's/kids | Activated in early September, approximately 8,000 teammates realigned by sport | Newly activated |
| Running momentum | Up high single digits in Q4 | Up over 20% in Q1 | Accelerating |
| Tariffs | Approximately $1 billion gross cost, 75 bps net FY2026 impact | Approximately $1.5 billion gross cost, 120 bps net FY2026 impact | Worsening on new reciprocal rate increases |
| Wholesale recovery | Holiday order book up | Spring order book up, wholesale grew 5%, expected to return to modest growth FY2026 | Improving |
| Greater China | Down 20% in Q4, deeper reset | Down 10%, seasonal sell-through still underperforming, store pilots encouraging | Still challenged, longer timeline |
| Nike Direct repositioning | Early premium signals in Q4 | Promo days cut more than 50% in NA, but not expected to grow in FY2026 | Repositioning ongoing |