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Pete Tan
October 01, 2025

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Hey everyone,

Nike just released their latest earnings, and it’s a bit of a mixed bag. There are some green shoots of recovery, but also some red flags that investors need to take seriously.

Let’s break it down 👇

📊 Headline Numbers

  • Revenue: $11.7 billion (+1% YoY)

  • EPS: $0.49 (down 30%)

  • Net Income: $727 million (down 31%)

  • Gross Margin: 42.2% (down from 45.4% last year)

  • Nike Direct: $4.5B, down 4% (Digital down 12%)

  • Wholesale: $6.8B, up 7%

  • Converse: $366M, down 27%

  • Greater China Revenue: down 9%

  • Inventories: $8.1B, down 2%

💡 What’s Working

  • Wholesale business is back. After a tough few quarters, wholesale sales rose 7%, showing signs of renewed demand from retail partners. This likely means excess inventories are finally being cleared.

  • North America is showing resilience. Nike’s largest market posted 4% growth overall, with strong gains in apparel and equipment, even though footwear stayed flat.

  • Disciplined cost management. Total selling and admin expenses dropped slightly (-1%), and demand creation expense (mainly marketing) fell 3% – showing Nike is trying to protect its bottom line while investing selectively.

🚨 What’s Not

  • Digital weakness is a concern. Nike Direct sales dropped 4%, led by a 12% decline in digital sales. For a brand that was banking on DTC (direct-to-consumer) growth, this is a red flag.

  • China recovery is sluggish. Greater China revenue fell 9%, with footwear dropping 11%. The hoped-for rebound post-COVID has yet to materialise for Nike in this key growth region.

  • Gross margins are getting squeezed. Down 320 basis points, mainly due to higher discounting, lower average selling prices, and tariffs in North America.

  • Converse is bleeding. Revenue down 27% across all territories. Once a growth driver, now struggling across the board.

🧠 What Should Investors Take Note Of?

  1. Margin pressure is real. Even with flat or slightly growing revenue, Nike’s profits are taking a hit. This has big implications for valuation if margins don’t rebound soon.

  2. Growth is uneven. Some geographies are stabilising (like North America), but others are still weak (especially China). This means progress won’t be linear – Nike itself warns of “different timelines” for recovery.

  3. DTC vs wholesale shift. Digital was supposed to be the big margin driver, but it’s underperforming. Wholesale now seems to be the short-term saviour – but wholesale comes with lower margins.

  4. Cash position remains strong. Despite lower profits, Nike still has $8.6B in cash and short-term investments – showing strong liquidity and ongoing shareholder returns (dividends + buybacks continue).

🔍 So… is this the start of Nike’s recovery?

Not quite but it could be the bottoming-out phase.

Management is pushing forward with its "Win Now" plan, focusing on key regions (like North America), strong product categories (like running), and a realigned “Sport Offense” strategy. They’re trying to rebuild momentum without overextending themselves.

If margins start improving, and if digital and China stabilise, then yes, this could be the early stage of a recovery.

But for now, investors should remain cautious, stay data-driven, and watch for confirmation in future quarters before going in too heavy.

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The information provided in this newsletter is for informational purposes only and does not constitute financial advice. Readers should seek their own independent financial advice before making any investment decisions. Please note that while Pete is a portfolio manager, the opinions expressed in this newsletter are his own and do not represent the views of any organization. Always perform your own research and due diligence before investing.