Nike reports unexpected sales rise, but flags slow holiday sales and steeper tariff costs than feared.

Nike's fiscal first-quarter 2026 results, released September 30, 2025, for the period ending August 31, showed an unexpected revenue uptick amid ongoing turnaround efforts, but the company tempered optimism with cautious guidance on the holiday quarter and escalating tariff pressures.

Key Financial Highlights

• Revenue: Total sales hit $11.7 billion, a 1% increase on a reported basis (down 1% currency-neutral), beating Wall Street's forecast of $11.0 billion. The core Nike brand drove this with $11.4 billion in sales, up 2% reported (flat currency-neutral). Wholesale revenue surged 7% to $6.8 billion, while Nike Direct (online and owned stores) dipped 4% to $4.5 billion.

• Regional Breakdown: North America sales rose 4% to $5.02 billion (topping expectations of $4.55 billion), but China revenue fell 9%, signaling persistent softness there.

• Converse Segment: Sales plunged 27% to $366 million, weighed by weak demand.

• Profitability: Earnings per share came in at $0.49, well above the anticipated $0.27. However, net income dropped 31% to $0.7 billion, and gross margin contracted 320 basis points to 42.2%, hit by higher discounts, lower average selling prices, channel shifts, and elevated North American tariffs. Inventories edged down 2% to $8.1 billion.

Holiday Season Outlook

Nike flagged a "sluggish" holiday period, projecting low single-digit revenue declines for the current fiscal second quarter (September to November), aligning with analyst calls for a 3% drop but vulnerable to a 1 percentage point FX tailwind. This follows an 8% revenue slump in last year's holiday stretch, with no immediate rebound expected in Nike Direct sales for the full fiscal 2026. Gross margins are forecasted to slip 3-3.75 percentage points in Q2, squeezed by ongoing promotions and costs. CEO Elliott Hill highlighted "progress" in priority areas like running (up 20% in the quarter) and wholesale, but stressed the path ahead involves "executable actions" amid "external headwinds."

Tariff Headwinds

The bigger sting: Nike now anticipates tariffs will dent fiscal 2026 by $1.5 billion—up from a prior $1 billion estimate—slashing gross margins by 120 basis points (versus 75 basis points earlier). CFO Matthew Friend attributed part of the Q1 margin erosion to these higher product costs, which offset inventory cuts. With much of Nike's manufacturing in Asia, renewed U.S.-China trade tensions amplify the pain, potentially forcing price hikes or supply shifts.

Market Reaction and Broader Context

Shares edged up about 1% in after-hours trading, buoyed by the revenue beat but capped by the dour guidance. The results underscore Nike's "Win Now" strategy under Hill, who took the reins in October 2024, focusing on sportswear innovation and retail partnerships amid competition from brands like On and Hoka. Analysts see running as a bright spot but worry China and tariffs could cap upside, with full-year revenue growth pegged flat to low single digits.