The news: Nike CEO Elliott Hill said the company is in the “middle innings” of its turnaround plan as it makes progress in select areas, including building back its wholesale business and boosting North American sales.

But major hurdles remain, including sluggish demand in China and continued margin pressure as Nike leans on promotions to clear excess inventory amid tariff headwinds.

The numbers:

• Revenues in the fiscal second quarter were $12.4 billion, up 1% on a reported basis and flat on a constant-currency basis, ahead of the $12.21 billion analysts expected.
• Wholesale revenues were $7.5 billion, up 8% on both a reported and constant basis, exceeding the $7.12 billion analysts expected.
• Nike Direct revenues were $4.6 billion, down 8% on a reported basis and down 9% on a constant basis, short of the $4.75 billion expected.
• North American revenues came to $5.63 billion, up nearly 9% reported and 7% on a constant basis.
• Greater China revenues were $1.42 billion, down 17% reported and 13% on a constant basis.
• Gross margin decreased 300 basis points to 40.6%.
• Diluted earnings per share was 53 cents, down 32% YoY but well ahead of the 37 cents expected.

Key challenges: Nike needs to reverse its declining direct-to-consumer sales, which includes both its stores and online, and address continued softness in China. Those turnarounds will take time: The company expects persistent revenue and gross margin headwinds through fiscal 2026, and it doesn’t expect the direct business to return to growth during that period.

Our take: Nike’s current challenges didn’t appear overnight; they stemmed from years of missteps in product, innovation cycles, and channel strategy.

Rebuilding its wholesale strength and reaccelerating China and D2C sales won’t happen quickly. Digging out of this slump will take time, disciplined execution, and patience, even as early signs of progress begin to show.

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