NIKE Q1 Earnings & Revenues Beat Estimates, Outlines Bleak Q2 Outlook

NIKE Inc. NKE reported first-quarter fiscal 2026 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. While the revenues improved on a year-over-year basis, earnings per share (EPS) declined. The company’s EPS of 49 cents declined 30% from the year-ago level. However, the figure beat the Zacks Consensus Estimate of 27 cents.Revenues of the Swoosh brand owner improved 1% year over year to $11.72 billion and surpassed the Zacks Consensus Estimate of $11.02 billion. On a currency-neutral basis, revenues were down 1% year over year.Revenues at NIKE Direct were down 4% on a reported basis and 5% on a currency-neutral basis to $4.5 billion. The decline resulted from a 12% drop in NIKE Brand Digital and a 1% decrease in NIKE-owned stores. Also, wholesale revenues rose 7% year over year on a reported basis and 5% on a currency-neutral basis to $6.8 billion.This Zacks Rank #3 (Hold) company’s shares have declined 8.8% over the past three months compared with the industry’s 7.8% decline.Image Source: Zacks Investment ResearchNKE’s Operating Segment Synopsis for Q1NIKE Brand revenues of $11.4 billion increased 2% year over year on a reported basis and were flat on a currency-neutral basis. Results were affected by a decline in China, offset by a currency-neutral growth in North America. We estimated total NIKE Brand revenues to decrease 5.1% year over year to $10.5 billion in the fiscal first quarter due to a 3.5% decline in Direct-to-Consumer and a 6.2% fall in the Wholesale business.Within the NIKE Brand, revenues in North America rose 4% year over year to $5.02 billion. Sales at NIKE Direct were down 3% in the region, including a 10% decrease at NIKE Digital and flat revenues at NIKE Stores. North America continues to build momentum, fueled by consistent brand activity across Sport and the strength of its premier sports marketing portfolio. Wholesale sales rose 11% year over year in North America. Wholesale returned to growth this quarter, aided in part by shipment timing compared with the prior year and increased liquidation volume to value channels.In EMEA, the company’s revenues improved 6% year over year on a reported basis and 1% on a currency-neutral basis to $3.3 billion. Wholesale business revenues rose 4% year over year. NIKE Direct revenues for the segment declined 6%, with a 13% decrease at NIKE Digital offset by 1% growth in NIKE Stores.In Greater China, revenues dropped 9% year over year on a reported basis and 10% on a currency-neutral basis to $1.5 billion. NIKE Direct fell 12%. NIKE Digital revenues dropped 27% year over year, and NIKE stores decreased 4%. Wholesale revenues for the region declined 9% year over year.In APLA, revenues increased 2% year over year on a reported basis and 1% on a currency-neutral basis to $1.5 billion. NIKE Direct dipped 6% due to an 8% decline in NIKE Digital and a 5% fall in NIKE stores. Wholesale revenues increased 6% in the region.Revenues at the Converse brand fell 27% on a reported basis and 28% on a currency-neutral basis to $366 million. The decline was due to softness across all territories.A Look At NIKE’s Costs & MarginsNIKE’s gross profit declined 6% year over year to $4.9 billion, while the gross margin contracted 320 basis points (bps) to 42.2%. The gross margin decline was caused by increased wholesale discounts and higher discounts in Nike factory stores. Additionally, elevated product costs, including new tariffs and channel mix headwinds hurt gross margins. We anticipated the gross margin to decline 350 bps to 41.9%.Selling and administrative expenses fell 1% to $4.02 billion. As a percentage of sales, SG&A expenses declined 60 bps year over year to 34.3%. The decline in SG&A expenses rate was led by reduced brand marketing spend, given the elevated investments made in key sports moments last year. This benefit was partly offset by increased sports marketing expenses in the current period. Our model predicted SG&A expenses of $4.15 billion, indicating a rise of 2.4% year over year.Demand creation expenses declined 3% year over year to $1.2 billion. Operating overhead expenses were flat year over year at $2.8 billion. Our model predicted demand creation expenses of $1.36 billion, indicating a year-over-year rise of 11.2%. Operating overhead expenses were anticipated to decline 1.4% year over year to $2.78 billion.NKE’s Balance Sheet & Shareholder-Friendly MovesNIKE ended first-quarter fiscal 2026 with cash and cash equivalents of $7.02 billion, down nearly 17% year over year. Short-term investments totaled $1.6 billion, down 14% year over year. As of Aug. 31, 2025, the company had a long-term debt (excluding current maturities) of $8 billion and shareholders’ equity of $13.5 billion.As of Aug. 31, inventories totaled $8.1 billion, down 2% year over year. In the fiscal first quarter, the company returned $714 million to shareholders, including $123 million in share repurchases and $591 million in dividends. As of Aug. 31, NIKE repurchased a total of 124.4 million shares for $12.1 billion, as part of its four-year $18-billion share repurchase program approved in June 2022.NKE’s OutlookIn the fourth quarter of fiscal 2025, management highlighted that the newly issued tariffs posed a meaningful cost headwind for NIKE, as they layered on top of the mid-teens rate it was already paying on imports. At that time, the company also outlined the actions underway to balance this impact, protecting consumers and partners, advancing its Win Now priorities, and safeguarding the long-term strength of its brands.Since then, reciprocal tariff rates have been raised further in certain countries. With these new rates now in effect, the company estimates a gross incremental annualized cost of roughly $1.5 billion, up from the $1 billion it shared in the prior quarter. As a result, the company now expects a 75-bp increase in net headwind to gross margin for fiscal 2026, which is now expected to be approximately 120 bps.The company also remains focused on executing the mitigation measures it outlined last quarter, while continuing to adapt as the conditions evolve. Even with these near-term pressures, management is confident that NIKE’s scale, brand strength, and seasoned leadership will allow it to navigate this disruption and position the company for sustainable growth.NIKE also outlined its guidance for the second-quarter fiscal 2026. It projects fiscal second-quarter revenues to decline low-single-digits. This includes a one-point gain from foreign exchange. The gross margin is expected to decline 300-375 bps, comprising a 175-bps negative impact from the new incremental tariffs.Management forecasts SG&A dollars to be up by high single digits, driven by higher demand creation investments and a low-single-digit rise in operating overhead. The company predicts other expenses, net of interest income, to be $10-$20 million for the fiscal second quarter. Management expects the tax rate to be in the low 20% range for the second quarter and fiscal 2026, driven by anticipated changes in earnings mix.NIKE, Inc. Price, Consensus and EPS Surprise NIKE, Inc. price-consensus-eps-surprise-chart | NIKE, Inc. QuoteBacked by the company’s ongoing Win Now actions, it also outlined some insights that will shape its performance for the rest of fiscal 2026. The company sees momentum building up in its wholesale business, driven by an improved Spring order book, aided by growth in sports. As a result, the company expects its wholesale business to return to growth in fiscal 2026.Additionally, the company is actively repositioning NIKE Digital as a full-price business. Organic traffic continues to decline at a double-digit rate, reflecting a prior-year base that was more heavily concentrated on classic footwear franchises, sneaker launches, and a higher mix of off-price sales. As a result, traffic comparisons are expected to remain under pressure. The company does not anticipate NIKE Direct to return to growth in fiscal 2026.In fiscal 2026, the company expects North America to continue leading its global recovery, while Greater China is expected to take longer to rebound given the unique marketplace dynamics. Converse, now under new leadership, is in the middle of resetting its brand and marketplace, which is expected to weigh on both revenues and gross margin through fiscal 2026.The company has made steady progress toward building a healthier marketplace by the first half of the year, though it anticipates modest revenue headwinds across both Wholesale and NIKE Direct, lapping last year’s clearance activity. While foreign exchange has shifted to a tailwind for reported revenues, it will provide minimal gross margin benefit in fiscal 2026 due to its hedged positions. SG&A is expected to increase in low single digits for fiscal 2026, reflecting continued investment in its Win Now actions, particularly in reigniting demand creation and rebuilding both its sports and commercial offense.Key Consumer Discretionary PicksWe have highlighted three better-ranked stocks, namely Ralph Lauren Corporation RL, Wolverine World Wide Inc. WWW and Hanesbrands Inc. HBI.Ralph Lauren, a major designer, marketer and distributor of premium lifestyle products in North America, Europe, Asia, and internationally, carries a Zacks Rank #1 (Strong Buy). RL has a trailing four-quarter earnings surprise of 8.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here. The Zacks Consensus Estimate for Ralph Lauren’s fiscal 2026 sales and EPS indicates an increase of 6% and 19.8%, respectively, from the year-ago levels. The consensus mark for fiscal 2026 EPS has moved up by a penny in the past seven days.Wolverine is engaged in the designing, manufacturing and distribution of a wide variety of casual as well as active apparel and footwear. The company currently carries a Zacks Rank #1. WWW has a trailing four-quarter earnings surprise of 39.1%, on average. The Zacks Consensus Estimate for Wolverine’s current financial-year sales and EPS indicates growth of 6.5% and 46.2%, respectively, from the year-ago figures. The consensus mark for 2025 EPS has been unchanged in the past 30 days.Hanesbrands engages in the design, manufacture, sourcing and sale of apparel essentials for men, women and children in the United States and internationally. It carries a Zacks Rank of 2 (Buy) at present. HBI has a trailing four-quarter earnings surprise of 56.1%, on average.The Zacks Consensus Estimate for Hanesbrands’ 2025 EPS indicates an increase of 65% from the year-ago level. The consensus mark for 2025 EPS has remained unchanged in the past 30 days.Beyond Nvidia: AI's Second Wave Is HereThe AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. Little-known AI firms tackling the world's biggest problems may be more lucrative in the coming months and years.See "2nd Wave" AI stocks now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report NIKE, Inc. (NKE): Free Stock Analysis Report Ralph Lauren Corporation (RL): Free Stock Analysis Report Hanesbrands Inc. (HBI): Free Stock Analysis Report Wolverine World Wide, Inc. (WWW): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks