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Nike
Ticker: NKE
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Nike Must Protect This House! - 06/16/2026
Know this is a controversial statement but there is a lot that this modern version of Nike could learn from Under Armour. First and foremost is that you do anything possible to protect whatever advantage you have in this industry. Under Armour has first-hand knowledge of how the old version of Nike used to treat competition – their original entry into running shoes (Nike’s heritage business) was annihilated by all resources that Nike could bring to bear at that time. Somewhere along the way Nike forgot that lesson and as a result opened the door to ample competition in the running category going forward. We don’t believe that door will ever be closed again but perhaps Nike can prevent the same thing from happening to its leadership positions in other areas?
This note focuses specifically on Nike’s football (soccer) business, including the confusing decision to introduce the Jordan brand into the sport. But more importantly, it focuses on Nike’s apparent lack of competitive fire towards defending its home pitch advantage for the World Cup. Adidas dominated the sport of football for most of the past 100 years, beginning with the West Germany win in the 1954 World Cup. Yet 40 years later Adidas took its eye of the ball at the 1994 World Cup and allowed just enough room for Nike to enter the sport in a meaningful way for the first time on their home pitch in the US. Brazil (best team in World Cup history) signed with the upstart Nike in 1996. Ten years later the previously unassailable market share advantage of Adidas became a virtual tie with Nike. That’s how quickly the leadership boards can change and if Nike is not careful, Adidas seems poised to return the favor using the 2026 World Cup as a springboard into a previously unassailable US market for all sports (not just football). Unlike Nike, they already have the product too (particularly in running).
There is no doubt that Nike still makes impressive marketing that cuts through the clutter and leaves a lasting impression, which we see with their “RIP The Script” short video for the World Cup. But they released that a week before the event began and have done practically nothing since other than posting shorter clips of the same video every few days on social media. Meanwhile peers like Adidas and Puma are constantly engaging with consumers through social media channels to celebrate the accomplishments of sponsored teams and players. Nike didn’t even feel it necessary to say anything on social media when the US team they sponsor won its first game in a shared home country by setting a historical record for goals in a single match.
We now believe the reasonable range of EPS estimate in FY26 is $1.45 to $1.60 and are more positively biased than current consensus of $1.50. The current narrative is stabilization in FY27 and back to growth afterwards but as investors can see with VF Corp, nobody seems willing to get involved until the later growth stage becomes more visible. Our work on the football business indicates that Nike might have more problems than they are letting on at the moment – not necessarily related to revenue generation for the World Cup but more towards operational gaps and strategic failures.
Is It Still “Winning” If You Buy Your Success? - 01/29/2026
What is driving Nike’s results in North America right now? Is it underlying improvement in the business or did they just flood the marketplace with product and then massively spend on marketing to push it through as best as possible? This is the most critical question facing investors today as they attempt to assess if the return to double digit EBIT margin for the total company is possible within the investible horizon (~3 years). We already know the timeline in China took a step back, APLA is a problem, and now questions towards EMEA are beginning to build.
Perhaps Nike simply decided the best approach to build brand heat is to emulate baseball: buy their way to success. Funny how that never seems to prove sustainable as the New York Yankees had the highest payroll for half of the past two decades yet the same number of World Series appearances as the Tampa Bay Rays, who consistently pay around the least. We don’t see any other athletic company trying to buy their way to success, rather practically everyone else in the industry (Adidas, Hoka, On, Under Armour, etc) is using a product first approach instead. That includes highly thoughtful and selective distribution as well (just heard this from VF Corp regarding Altra), which doesn’t seem to exist anymore at Nike. Of course, this might be because of an overlooked product organization for the past decade (thanks John Donahoe) and how it could take years to build that muscle back (given employee departures and technical lead times).
In this note, we dig deeply into elevated levels of demand creation, constant organizational structure changes, and employee turnover (including executives). One can make the argument that Nike is funding heightened levels of demand creation off cycle (for major events) through constant and apparently never-ending employee layoffs. All of this might be the necessary path for the company to return to greatness, but it doesn’t provide confidence that return is happening soon. Meanwhile, bulls continue to think the turnaround is just around the corner for yet another quarter while full year estimates only continue to go down. The best-case scenario they have is CEO Elliott Hill is playing 4D chess and “never letting a crisis go to waste” so proactively making changes that will be more difficult to perform going forward as results immediately improve.
We also investigated product highlighted in last month’s call. Excessive promos for the Phantom 6 are not a good look for the upcoming World Cup and a similar situation for Structure 26 could illustrate what happens when you don’t buy success to “Win Now” in running. Our checks indicate Nike is making a huge push in ACG this February but that really doesn’t seem like a “skating to where the puck is going to be” strategy that Nike historically is famous for. Nike Mind does seem to have that potential though and illustrates the innovation approach severely needed.
Despite the negative points we make, it also increasingly seems the worst is now behind the company (thus the Tim Cook insider purchase). Regardless, any scenario without meaningful forward year EPS acceleration likely faces the threat of significant valuation multiple compression.
Throwing Shoelaces Against The Shoe Wall - 11/03/2025
The two most critical things Nike needs to solve for today are distribution and product. Therefore, we took a deeper look into both topics to better assess where the company’s turnaround efforts currently sit. Nike’s corporate reorganization into a “Sport Offense” is an encouraging step in the right long-term direction but we are unlikely to see a meaningful benefit from this new structure until the end of FY27 given standard product lead times. Meanwhile Nike has been using a “Win Now” playbook ever since Elliott Hill became CEO but that increasingly feels like a nicer way of just saying they pulled every somewhat reasonable short-term lever at their disposal to stop the hemorrhaging of revenue, market share, and profitability. The word reasonable is debatable here as Nike seems to have decided it’s better to dump valuable new product into the entire marketplace rather than take further losses as it pulls back from overreliance on classic product.
Nike: Pigs At The Trough Often Get Slaughtered - 7/2/2025
Nike’s management is calling the trough in its business following 4Q25 as results are expected improve from here. We dug into product commentary from the call and also critically assessed how consensus numbers shook out, which matters more than ever given they are not providing guidance beyond the forward quarter. Net takeaway for the latter is we currently see a realistic FY26 EPS range of $1.35 to $1.80 but are more negatively biased than the sell-side consensus of $1.65.
Nike Distribution Needs A “Personal Genie” - 2/10/2025
Distribution is the single largest challenge at Nike today. Many seem to think the only issue is innovation and certainly they can improve in that regard. But while it is likely true that innovation solves most problems (i.e. “hot” product often finds a way to sell itself), a company the size of Nike needs both of those engines to run at full steam. Bulls like to think that all Nike needs to do is launch some innovation and everything returns to normal. But what if their distribution problems are largely structural?
The Potential Nike Turnaround - 8/14/2024
This is not yet another negative Nike note. By now we have all likely read some of the ample Nike thought pieces that discuss the problems that John Donahoe is clearly responsible for. I am happy that everyone is coming out of the woodworks to share information. I didn't even know some of the background that is public today when I wrote Nike & John Donahoe back in mid- April. Alas, that is the perpetual problem of being a sell-side analyst; we always have a small subset of information to base our opinions on. Rather, I strongly feel now is the time to start thinking about the potential Nike recovery path.
Nike & John Donahoe - 4/14/2024
I never understood the thought process behind John Donahoe becoming CEO of Nike. I (luckily) maintained my buy rating on the stock at the time because there wasn't much he could do to change their innovation pipeline at that point, but I certainly flagged my concerns to investors in our discussions regarding longer term risk/reward.
Also, by 2019 most hedge funds had already been burnt shorting Nike in late 2018 so there was likely never going to be meaningful selling pressure for the foreseeable future. And I didn't have a catalyst to point to. Just my unease with John's background. So with that, let's talk about how John Donahoe tried to blame Nike's lack of innovation on remote working last Friday.