NIKE's Q2 2026 Earnings Call: Contradictions Emerge on North America Strategy, China Market Reset, and Digital Traffic Pressures

Business Commentary:

• Progression and Growth:
• NIKE, Inc. reported revenue up 1% on a reported basis and flat on a currency-neutral basis for Q2 Fiscal 2026.

• The growth was attributed to a modest year-over-year top line growth despite managing challenges and repositioning the business.

• Running and Sport Division Growth:

• The biggest drivers of growth were the Running and sport dimensions, with Running growing over 20% for the second quarter in a row.

• This performance was driven by a relentless flow of innovative products through NIKE's sport offense strategy and athlete-centered innovation.

• North America Market Performance:

• North America revenue grew 9%, with wholesale experiencing 24% growth and NIKE Direct down 10%.
• Growth was driven by strong performance in running, kids, basketball, and training, as well as strategic partnerships and effective marketing campaigns.

• Challenges in China:
• Greater China revenue declined 16%, with NIKE Direct down 18% and wholesale down 15%.
• The challenges were due to a longer road to recovery, off-price positioning, and efforts to return to a premium brand status in the market.

Contradiction Point 1

North America Growth Strategy and Applicability to China

It involves the company's strategy and growth expectations for different regions, with a contradiction in the applicability of the North America model to China and the timeline for China's recovery, which directly impacts expectations regarding strategic direction and growth potential.

Is the North America model applicable to China, and why not set 2-3 year targets or provide specific timelines? - Jonathan Komp (Baird)

2026Q2: China requires a fresh approach and new capabilities. We're confident in our plan and expect to see improvement, but it's tough to provide a specific timeline due to the complex reset needed. - Elliott Hill(CEO)

What are the strategies for transforming the digital business in China, and what are the store refresh costs and timeline? - Lorraine Maikis (BofA Securities, Research Division)

2026Q1: We are confident that we will be able to find a path back to profitability in China, and we are more confident going into the year that we can begin to return to growth in China over the course of the year. - Elliott Hill(CEO)

Contradiction Point 2

Digital Business Strategy and Traffic Pressures

It involves the company's approach to its digital business and the reasons behind traffic pressures, with a contradiction in the attribution of reduced traffic to strategic repositioning, which can impact investor expectations regarding the effectiveness of the company's digital strategy.

How is growth distributed across verticals, and how satisfied are you with the partner mix in North America? - Aneesha Sherman (Sanford C. Bernstein & Co., LLC)

2026Q2: We're managing NIKE Digital to transition from a constricting focus on promotional activity and markdowns. - Elliott Hill(CEO)

What portion of NIKE Digital's traffic decline is due to strategic promotion cuts, and what growth milestones should be monitored? - Brooke Roach (Goldman Sachs Group, Inc., Research Division)

2026Q1: Organic traffic is down due to repositioning NIKE Digital. - Elliott Hill(CEO)

Contradiction Point 3

North America Growth Strategy and Confidence

It highlights a shift in the company's confidence and strategy regarding the North America market, which is a significant region for their revenue growth, affecting investor expectations regarding the company's strategic direction and financial performance.

How do you view growth phasing across verticals, and are you satisfied with the North America partner mix? - Aneesha Sherman (Sanford C. Bernstein & Co., LLC)

2026Q2: North America is leading, with growth across footwear, apparel, and equipment. The momentum is being driven by Running, Global Football, Training, SKIMS, and basketball. We've got a balanced mix of new and existing partners, and the performance in Running and Global Football provides confidence that this momentum will continue. - Elliott Hill(CEO)

With wholesale as the largest driver, will you return to overall growth this year? - Jonathan Komp (Baird)

2025Q4: North America has been the difficult business to predict because there's been a lot of noise and a lot of fits and starts in terms of market trends, in terms of the consumer willingness to buy products at full price that they're excited about, channel trends, and so forth. It's been an evolving environment. - Elliott J. Hill(CEO)

Contradiction Point 4

China Market Strategy and Challenges

It reveals differing views on the strategy and timeline for addressing challenges in the China market, which is crucial for long-term growth, impacting expectations regarding the company's market strategy and growth potential.

Is the North America model applicable to China, and why aren't 2- or 3-year targets or specific timelines provided? - Jonathan Komp (Baird)

2026Q2: We recognize that Greater China Recovery 3.0 will require a different approach and capabilities. We're confident in the plan and expect to see improvement, but we're not in a position to give specific timelines for when we'll be back to growth. - Elliott Hill(CEO)

What structural changes could affect NIKE's ability to maintain double-digit margins? - Alex Straton (Morgan Stanley)

2025Q4: As we look to China and the reset there, we'll ultimately need to reflect on how we measure success and what's more important. Is it how much one can grow in a single year as we're working to stabilize a marketplace or is it the brand health of NIKE in that market? - Elliott J. Hill(CEO)

Contradiction Point 5

North America Model Applicability and Geographical Strategy Divergence

It involves the differing perspectives on the applicability of the North America model to the Greater China market, which could impact strategic decision-making and investor expectations regarding market strategy and growth potential.

Is the North America model applicable in China, and why aren't 2- to 3-year targets or specific timelines provided? - Jonathan Komp(Baird)

2026Q2: The North America model is not a perfect fit for China, given China's accelerated market evolution and unique customer behaviors and preferences. China requires a fresh approach and new capabilities. - Elliott Hill(CEO)

When do you expect classic shoe inventories to be cleared in wholesale and direct channels? - Lorraine Hutchinson(Bank of America)

2025Q3: The principle is the same, which is leverage our North America model, which is the strength of our digital marketplace, which is really about this integrated consumer-led marketplace. - Elliott Hill(CEO)