Nike reports revenue decline amid strategic repositioning
“Nike's second-quarter financial performance largely met our expectations as we continue to make progress in shifting our portfolio. Under Elliott's leadership, we are accelerating our pace and reigniting brand momentum through sport”, said Matthew Friend, Chief Financial Officer at Nike.
Quarter Results
Nike has announced its financial results for the second quarter of fiscal 2025, which ended on the 30th of November 2024. Revenue declined by 8% to 12.4 billion US dollars compared to the same period last year. On a currency-neutral basis, revenues fell 9%, with declines reported across all Nike Brand and Converse geographies. Direct revenues were particularly impacted, dropping by 13% due to a 21% fall in Nike Brand Digital sales and a 2% dip in Nike-owned stores. Wholesale revenues also contracted by 3%.
Gross margin decreased by 100 basis points to 43.6%, driven by higher discounts and changes in channel mix, although lower input and logistics costs partially mitigated the impact. Operating costs reflected mixed trends, with selling and administrative expenses decreasing by 3% to 4 billion US dollars. Operating overhead expenses declined by 5%, primarily due to reductions in wage-related costs. However, demand creation expenses increased by 1%, driven by higher sports marketing spend.
Net income for the quarter fell by 26% to 1.2 billion US dollars, and diluted earnings per share dropped by 24% to 0.78 US dollars. Despite the challenges, the effective tax rate remained stable at 17.9% compared to the prior year. Nike returned 1.6 billion US dollars to shareholders, comprising 557 million US dollars in dividends, a 7% increase year-over-year, and 1.1 billion US dollars through share repurchases.
Balance Sheet
Nike’s inventory levels were flat year-over-year at 8 billion US dollars, reflecting increased units offset by shifts in product mix and lower input costs. Cash and equivalents stood at 9.8 billion US dollars, a slight decline of 0.2 billion US dollars from the prior year. This reduction was attributed to the offsetting effects of operational cash flow, share repurchases, dividends and capital expenditures.
Chief Executive Officer Elliot Hill reflected on his return to Nike and outlined the company's renewed focus: “After an energizing 60 days of being back with my Nike teammates, our clear priority is to return sport to the centre of everything we do. We are taking immediate action to reposition our business so we can get back to driving long-term shareholder value. Our team is ready to go, and I am confident you will see more moments of Nike being Nike again”.
Image Credits: marmonsports.com