What Management Said
Read the full Q1 2026 transcript ↗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.
What went well
- Nike running grew over 20% in the quarter, serving as an early proof point for the Sport Offense after the running team redesigned the Vomero, Structure, and Pegasus around three core athlete insights.
- Total revenue was up 1% on a reported basis, with wholesale growing 5% and the company realigning approximately 8,000 teammates to the new Sport Offense.
- North America Q1 revenue grew 4% with wholesale up 11%, and running, training, and basketball each delivered double-digit growth.
- The company reset over 1,300 running spaces in North America and saw stronger-than-anticipated engagement and sales from the new Nike brand store on Amazon.
- Nike Digital made progress repositioning to full price, reducing site-wide promotion days by more than 50% in North America and lowering markdown rates, while inventory decreased 2% versus the prior year.
- The spring order book is up versus the prior year led by sport, supporting an expectation of wholesale revenue returning to modest growth for fiscal 2026.
What went wrong
- Gross margins declined 320 basis points to 42.2% due to higher wholesale and factory store discounts, increased product costs including new tariffs, and channel mix headwinds.
- The sportswear business continued to decline as teams work to get sharper on the consumers being served, with classic footwear franchises down about 30% in North America.
- Greater China revenue declined 10% with EBIT down 25%, as seasonal sell-through continued to underperform plans and store traffic declined versus the prior year.
- Nike Direct declined 5% with Nike Digital down 12%, and organic digital traffic continued to decline double digits.
- APLA inventory grew high single digits, requiring additional actions to rebalance inventory and tighten buys on Nike Direct.
Guidance Changes
| 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) |
Performance Breakdown
| 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 |
Earnings Call Themes & Trends
| 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 |
Q&A Summary
How does the spring order book compare to the prior holiday book, and how are you thinking about medium-term margin levels and the phases of recovery?
Hill cited running up over 20%, growth with wholesale partners, and the spring order book being up year over year as signs of progress across product, marketing, and marketplace. Friend said North America, EMEA, and APLA order books are offsetting Greater China headwinds, framed FY2026 margins around three dynamics, and said the path back to double-digit margins starts with reigniting organic growth, improving full-price mix, and driving operating leverage.
How has September progressed, and was there a pull-forward of consumer demand into the back-to-school period that benefited Q1?
Hill called the environment dynamic and said the team is controlling what it can control, citing good sell-through around Vomero, the U.S. Open, and Ja and LeBron in China. Friend said Q1 performance had nothing to do with pull-forwards, that the fall-season shipment timing created a year-on-year benefit, and that Q2 revenue is guided down low single digits driven by a bigger Digital headwind, less FX benefit, and Dunk comparisons.
Can you elaborate on the early wins, notably the return to growth in North America and the acceleration in running, and the structural foundation to expand the strategy?
Hill described two parts: the Win Now actions (the five priorities put in place within the first 60 days) and the Sport Offense activated in early September. He cited running up 20%, wholesale growth, spring order book up, and North America success as signals it is working, while noting work remains in Greater China, Nike Direct, and sportswear.
How much of the Nike Digital traffic pressure is attributable to the strategic reduction in promotion versus other factors, and what milestones should we watch?
Hill reframed the goal as elevating and growing the entire marketplace, not just Nike Direct digital. Friend said organic traffic is down double digits primarily due to repositioning actions including reduced promo days, improved markdown rates, lower classic and launch share, and pulled-back paid media, with EMEA and North America furthest ahead, and noted Direct is not expected to return to growth this fiscal year but should be healthier and more profitable in the future.
What strategies are you using to turn the China digital business, and what is the cost and timeline of the store refresh?
Hill said Nike believes in the long-term China opportunity led by sport and the Geo Express Lane local-for-local product, but the digital marketplace is promotional and the physical monobrand fleet needs stronger operations, assortments, and presentation. Friend said significant investments over three quarters drove Nike inventory down 11%, but it is an expensive operating model unless sell-through improves, so China will remain a top-line and margin headwind for the balance of FY2026 with encouraging early store pilots.
With inventory down 2% on the balance sheet, how would you characterize wholesale channel inventory and the timing of when wholesale discounts begin to fade?
Friend said units were down in North America, EMEA, and Greater China but up in APLA, which is the focus area. He expects gross margin benefit in the second half from lapping aggressive actions and improvement in the wholesale channel, citing the forward-looking order book as the best indicator that partner inventory is healthy, while noting other second-half headwinds will mute the benefit.
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Reported 2025-09-30 · figures from the NIKE, Inc. Q1 2026 earnings call.
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