ii view: Nike shares spike lower on dual headwinds

Second-quarter results to 30 November

• Revenue up 1% year-over-year to $12.4 billion
• Adjusted earnings down 32% to $0.53 per share
• Shareholder returns of $598 million

Guidance:

• Expects third-quarter revenues to fall by a low-single digit percentage

Chief executive Elliott Hill said: “Nike is in the middle innings of our comeback. We are making progress in the areas we 
prioritised first and remain confident in the actions we’re taking to drive the long-term growth and profitability of our brands.”

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ii round-up:

Sporting goods maker Nike Inc Class B (NYSE:NKE) detailed falling second-quarter China-related sales with the profit margin for the current third quarter expected to fall further given ongoing US trade tariffs.

A 9% gain in North American sales to $5.63 billion (£4.21 billion) countered a 17% fall in China sales to $1.42 billion, leaving groupwide second-quarter sales to late November up 1% to $12.4 billion. Nike’s making of goods across Asia and export into its home US market left the profit margin for the period down 3% to 40.6%, taking adjusted earnings down 32% from a year ago to $0.53 per share.

Shares for the Dow Jones company fell 10% in post-results US trading having come into these latest numbers down by 13% so far in 2025. The Dow Jones index is up 12% year-to-date. Shares for European rival adidas AG (XETRA:ADS) have fallen by 29% during that time. 

Nike footwear generated most sales over its last financial year at 66%, with clothes at 28% and equipment the balance of 5%.

Back under former chief executive Elliott Hill, Nike is pursuing a  “Win Now” transformation programme. Initiatives include reprioritising sales to other retailers or use of its wholesale channel over direct sales, as well as pushing product innovation and group-wide efficiency. 

Wholesales revenues, and including sales to retailers such as JD Sports Fashion (LSE:JD.) and Dick's Sporting Goods Inc (NYSE:DKS), rose 8% during Q2 to $7.5 billion.

Direct revenues fell 8% to $4.6 billion. Nike recently executed a series of management changes including a change of the company’s chief commercial officer. 

A 3% gain in European-related sales to $3.4 billion helped counter a 4% fall in combined Asian and Latin American sales to $1.7 billion. 

Total sales for the group’s Converse brand fell 30% from a year ago to $300 million. Third-quarter results are likely to be announced in mid to late March. 

ii view:

Started in 1964, the group takes its name from Nike, the Greek goddess of victory. Today, the company employs more than 75,000 people. Other rivals include Puma SE (XETRA:PUM), New Balance, Under Armour and Skechers.  

For investors, Trump trade tariffs now add to group costs, even its manufacturing of products across Asia. Trade negotiations between the US and China have likely increased consumer tensions and potential avoidance of products from each other.

A previous reliance on established brands such as Jordans and product innovation from players such as New Balance have hindered sales and required increased marketing spend, while an estimated price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap. 

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More favourably, a reinvigoration of Nike under returning CEO Elliott Hill is being pursued. There is diversity across both products and geographical locations. Trade talks between the US and China remain ongoing, while a focus on shareholder returns includes both share buybacks and a forecast dividend yield of around 2.4%.

For now, ongoing management initiatives offer hope. That said, more cautious investors may decide to await more concrete signs of recovery before adding to any existing shareholdings. 

Positives: 

• Product and geographical diversity
• Ongoing shareholder returns

Negatives:

• Uncertain economic outlook
• Subject to currency moves

The average rating of stock market analysts:

Buy