Nike’s second-quarter financial performance for Fiscal Year 2025 has revealed significant challenges the company must navigate to regain its footing in the competitive sporting goods market. With a notable drop in earnings and revenue, the well-known brand is in the spotlight, facing the dual pressures of retail struggles and a decline in digital sales. Resultantly, Nike’s focus has shifted towards strategies aimed at reinvigorating its brand momentum and returning to its core sporting ethos.
As disclosed in Nike’s latest earnings report, the company experienced a decrease in basic earnings per share from $1.04 to $0.78 year-on-year, and a similar reduction in diluted earnings per share from $1.03 to $0.78. This decline in earnings comes alongside an 8% downturn in overall revenue, reducing to $12.35 billion compared to $13.38 billion in the previous year.
Matthew Friend, Nike’s Executive Vice President and CFO, acknowledged that the financial results were largely anticipated as Nike progresses in restructuring efforts. Friend highlighted, “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.”
The decline in revenue was apparent across Nike’s core segments, with the Nike Brand revenue dropping by 7% to $12.0 billion and digital sales plummeting by 21%. The decline in digital sales marks a significant reversal of fortunes for a segment that had seen a 150% increase over five years, representing a crucial growth driver for Nike during that period. This downturn is attributed to changes in consumer spending habits and a substantial year-over-year reduction in sales of key footwear franchises such as Air Force 1, Air Jordan 1, and Dunk.
Wholesale operations experienced a 3% decline on a reported basis, indicating a relatively better performance compared to direct sales channels, where Nike Direct revenue fell by 13%. This contrast highlights challenges in balancing Nike’s ongoing shift towards direct-to-consumer (DTC) operations. This move, initiated under the Consumer Direct Offense strategy in 2017, aimed at reducing reliance on retail partners to enhance direct channels, seeks renewed alignment with evolving market demands amid rising inflation and cautious consumer spending.
Elliott Hill, Nike’s President and CEO, stressed the imperative for recalibrating the company’s approach to put sport at the heart of operations. Having rejoined Nike with fresh energy, Hill remarked, “After an energising 60 days of being back with my Nike teammates, our clear priority is to return sport to the centre of everything we do. We’re 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’m confident you will see more moments of Nike being Nike again.”
Despite the pressures, Nike’s gross profit, which fell from $5.97 billion to $5.38 billion, was partly cushioned by strategic cost reductions in warehousing and logistics. However, the gross margin was affected by higher discounts and channel mix changes.
In looking ahead, Nike anticipates a low double-digit percentage revenue decline in Q3, impacted by strategic restructuring efforts and an unfavorable foreign exchange climate. The anticipated drop in gross margins by 300 to 350 basis points due to prior restructuring costs further emphasizes the financial adjustments needed to stabilize the business.
Nike also navigates evolving consumer behavior, where digital and overall revenue declines reflect discretionary spending adjustments amid inflationary constraints. Remarkably, the company remains a significant player in the resale market, with a Chummy Tees analysis noting Nike as the most resold brand on platforms like eBay and Depop, which may have broader implications for Nike’s brand management strategies.