NIKE, Inc. 10-Q Summary: Fiscal Q1 2026
Business Context and Reporting Period
This filing covers the quarterly period ended August 31, 2025 (Fiscal Q1 2026). NIKE, Inc. designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories globally. The company operates through two primary distribution channels: NIKE Direct (owned retail and digital) and wholesale accounts.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 | Change |
|---|---|---|---|
| Revenues | $11,720 million | $11,589 million | +1% |
| Net Income | $727 million | $1,051 million | -31% |
| Diluted EPS | $0.49 | $0.70 | -30% |
| Gross Margin | 42.2% | 45.4% | -320 bps |
| Operating Cash Flow | $222 million | $394 million | -44% |
| Cash & Equivalents | $7,024 million | $8,485 million | -17% |
| Long-Term Debt | $7,996 million | $7,961 million | +0.4% |
Material Changes vs. Prior Period
- Revenue Mix: While total revenue grew 1%, currency-neutral revenue declined 1%. Wholesale revenues increased 7% (driven by unit volume), while NIKE Direct revenues fell 4% due to a 12% decline in digital sales.
- Profitability Compression: Gross margin contracted significantly by 320 basis points. This was driven by lower average selling prices (ASP) due to higher discounts, increased product costs (including new tariffs), and unfavorable channel mix.
- Segment Performance:
- North America: Revenue +4%; EBIT -7% due to margin pressure from tariffs and discounts.
- Greater China: Revenue -10% (currency-neutral); EBIT -25% due to declines in both wholesale and direct channels.
- Converse: Revenue -28%; EBIT -68% due to declines across all territories and significant margin compression.
- Inventory: Inventories increased 8% to $8.1 billion, driven by product mix and increased unit levels.
Guidance, Outlook, and Risks
- Tariff Impact: Management expects a gross incremental cost of approximately $1.5 billion on an annualized basis due to new tariffs, which will negatively impact gross margins in fiscal 2026.
- Strategic Shifts: The company is reducing supply of certain footwear to rebalance the portfolio, liquidating inventory through markdowns, and repositioning NIKE Brand Digital as a full-price platform. These actions are expected to have a near-term negative impact on revenue and profitability.
- Capital Allocation: Share repurchases were moderated and ultimately stopped during the quarter due to lower operating cash flows. The company returned approximately $0.7 billion to shareholders via dividends and repurchases in Q1.
- Legal Contingencies: A Belgian customs claim regarding alleged underpaid duties remains unresolved; the company disputes the claim but cannot estimate the potential loss range.
Investor Verification Checklist
- Tariff Mitigation: Verify the specific actions being taken to offset the projected $1.5 billion annualized tariff cost and the timeline for margin recovery.
- Digital Sales Trend: Monitor the 12% decline in NIKE Brand Digital sales to determine if this is a temporary traffic issue or a structural shift in consumer behavior.
- Inventory Health: Assess the sustainability of the 8% inventory increase and the effectiveness of current markdown strategies in clearing stock without further eroding margins.
- China Recovery: Evaluate the depth of the 10% revenue decline in Greater China and the potential for a rebound in the coming quarters.
- Cash Flow Sustainability: Confirm if operating cash flow can stabilize to support the $18 billion share repurchase program, which was paused in Q1.