By Nicholas P. Brown
NEW YORK, Dec 17 (Reuters) - Nike investors will look for signs this week that the recovery glimpsed last quarter is sustainable and that a bigger marketing budget is helping the sportswear maker claw back market share lost to nimbler rivals.
Nike, long synonymous with sport, is trying to regain momentum after ceding ground to hipper alternatives such as On and Deckers' Hoka. Demand in China has been choppy. CEO Elliott Hill has vowed to return Nike to its roots, focusing on core
sports like running and soccer.
That first means aggressively clearing out old inventory – usually at discounts – which is weighing on revenue at a time when steep tariffs are pressuring margins. Last quarter, Nike raised its expected tariff costs this year to $1.5 billion, citing exposure to high-tariff countries such as Vietnam.
The company, set to report second-quarter earnings on Thursday, had nearly 60 marketing and communications jobs open on its website as of Tuesday and held a rare job fair for communications professionals in New York this week. Finance chief Matthew Friend in September forecast "an acceleration of demand creation investment" - corporate speak for marketing spend.
That spend is expected to top $5 billion in 2026, according to LSEG data, up from $4.68 billion in fiscal 2025.
The added focus on marketing is "a bullish sign that they feel better about the product," but also that "they acknowledge they need to make the appropriate investment behind it," said Mari Shor, senior equities analyst at Columbia Threadneedle, which holds Nike stock.
Nike is expected to report that net profit fell for the sixth straight quarter in the three months ended November 30, more than halving to $562.35 million, according to LSEG data. Second-quarter revenue likely fell again - down 1.09% to $12.22 billion - after a small uptick in the first quarter. Gross margin likely slipped to 40.77% from 42.2% in the first quarter.
MARKETING AND INNOVATION IN FOCUS
In recent years, Nike has lacked new, innovative products to highlight, leading its ads to focus more on the storied brand than individual products, said Morningstar analyst David Swartz. As the company starts to innovate on new products, its advertising could evolve, he said.
But Swartz added: "No one is expecting a great quarter."
Competition in China, which accounts for 15% of sales, has been stiff from domestic brands Anta and Li-Ning. Retail in China operates mostly through monobrand stores, limiting a company's ability to sell through diverse channels as Nike does in the United States.
Nike has invested heavily in new versions of its running shoe lines Pegasus Premium and Vomero 18 - as the running category has performed well - while scaling back production of sneakers such as the Air Force 1. With new products boosting performance - and the sports marketing bonanza that is the World Cup six months away - Nike faces a golden chance to reaffirm its cultural cachet.
It has also forged partnerships with Kim Kardashian's activewear and essentials brand SKIMS, while promoting sustainability initiatives such as recycled materials to align with evolving consumer demands for ethical shopping.
(Reporting by Nicholas P. Brown. Additional reporting by Juveria Tabassum in Bengaluru. Editing by Sayantani Ghosh and Mark Potter)
