If the early read on Nike Inc.’s Win Now turnaround plan is any indication of future success, then the sportswear and sneaker brand racked up multiple wins in the first quarter — and Wall Street took notice of both the good and the bad.
“This quarter, our Win Now actions drove momentum in the areas we prioritized first: running, North America and wholesale partners. It showed that we’re making the right choices. Consumers are responding. We’re getting some wins under our belt,” Elliott J. Hill, Nike’s president and CEO told analysts during the firm’s first quarter earnings call Tuesday after the equity markets closed.
For now, North America is leading the turnaround, and Hill said that the spring order book is up year-over-year, indicating that Nike’s retail partners “are gaining trust in us.”
He noted the new formation of Sport Offense — the alignment of the three brands, Nike, Jordan and Converse, into more nimble, focused teams by sport — to get the teams closer to the athletes who buy Nike’s product. “That’s why the Sport Offense is going to be so critical to our success,” he explained. “We’ll gain sharper insights to fuel innovation in storytelling and connect with the communities of each sport in more meaningful ways.”
Hill sees the new alignment as a competitive advantage available only to Nike: “We believe the opportunity to serve so many athletes across sports with three distinct brands in retail channels at every price point is an advantage that no one else has in our industry.”
Hill also said that organizing by sport also provides a clearer point of view, citing to the House of Innovation in New York as one example where the retail experience was redesigned by sport.
“I walked the floors in early September and we’re now able to take a consumer into a world of Jordan, a world of Nike Running or a world of Nike Global Football. It’s an immersive sport experience and the refresh has already led to double-digit revenue increases. That clarity works in small format doors as well,” Hill explained.
Another example is the redesign of the South Congress store in Austin, Tex., to focus only on running and training, and sales have “significantly increased,” Hill told investors.
Another win has been its running business, which Hill said provides an “early window into the impact we expect out of Sport Offense.” He said the running team moved fastest into the new formation and learned from athletes that they want “big cushioning, stability or an everyday shoe that returns energy” from their running shoes, and that Nike moved quickly to redesign the Vomero, Structure and Pegasus. He also said the plan is to apply learnings from running to more sports and sport culture, including global football, basketball, training and sportswear, adding that each sport is in a different stage of development.
While the early read on running shoe sales has been a show of strength, Drake MacFarlane, research analyst at M Science, cautioned that “performance running isn’t everything,” noting that there are other aspects of Nike’s business that still needs work, particularly China.
“China results are a little disappointing in my view,” MacFarlane said, noting that Nike cited the promotional environment there. “I’d like to see that improve a little bit more meaningfully, since it’s still a pretty decent chunk of their business.”
Nike’s China business was down 10 percent for the quarter, and Hill said in the fourth quarter call that the country is facing structural challenges in the marketplace. Because Nike believes in the long-term opportunity in China, the company plans to make larger investments in that marketplace. But with over 5,000 mono-brand stores in China, Hill said Tuesday that “this will take investment, and it will take time.” He also said the company is “testing and resetting new consumer concepts” in China.
The M Science analyst also said he’d like to see more clarity on how Nike plans to revitalize its sportswear business, one area that Hill said is a focus for the company. “I am very curious to see what Nike does with apparel. Apparel was not performing in the last quarter and that is before they launched the NikeSkims collaboration with Kim Kardashian‘s Skims brand,” MacFarlane said. “I think re-engaging with a female consumer is the right move. I definitely think Adidas has benefited from a more fashion-conscious, female consumer over the past several years.”
But the analyst also raised some questions. “You can look on the website, you might see a couple of things out of stock, but that’s not necessarily indicative of how much stock was originally there,” he noted, adding that Kardashian is more for a millennial audience, and he’s not so sure if the brand would resonate with the younger Gen Z and Gen Alpha demographic.
Laurent Vasilescu, senior equity analyst at BNP Paribas, noted that second quarter revenue guidance was down low-single digit, “suggesting that it’s not getting better sequentially,” and added that September weakness could lean away from bullishness to more toward bear territory.
Needham analyst Tom Nikic said that while top-line trends were improving, there were still some pain points, including incremental tariff headwinds. And Telsey Advisory Group’s Cristina Fernández said that the positives were “tempered” by continued headwinds on profitability, including tariff costs rising to $1.5 billion from an earlier estimate of $1 billion. She also noted lower customer traffic to the digital channel due to fewer promotions year-over-year. In addition, “promotions are now expected to be higher in China and EMEA (Europe, Middle East and Africa), as well as at Converse in order to match inventory levels to demand,” she said.
But even with the headwinds, there’s still enough good news to be a bit more bullish about Nike’s prospects, even it more time is needed to effect its comeback goals.
Williams Trading’s Sam Poser noted that, as expected, it will take Nike 15 to 18 months from Oct. 14, 2024, the day Hill became CEO, for Nike to return to a pull model.
“Improvements are becoming noticeable now, at the 12-month mark. Margin improvement will likely lead improvement in sales trends,” Poser said. “Mr. Hill clearly understands that Nike needs to reestablish its category offense, which it now calls Sports Offense, as compared to a gender offense which resulted in disjointed brand messaging and product development.”
Even better, Poser noted that Nike is “just beginning to use the information gathered at the local level to create compelling product, and tactically manage and market the Nike brand and its key franchises with a focus on sport.” He said that the outlook for the balance of Fiscal Year 2026 is improving, with sales trends in North America expected to rise as new products from the Vomero line and increased quantities of Retro Jordans are delivered in the coming weeks.
And with the expectation that Nike will increase shipments of core, sub-$100 dollar, footwear to the family footwear and department store channels, those sales should offset ongoing weakness of the Dunk franchise in the wholesale channel.
And HSBC’s Erwan Rambourg, global head of luxury and consumer, said he sees “light at the end of the tunnel.” With the core Nike brand finally stabilizing and wholesale expected to turn positive, retail will remain under pressure as Nike Direct continues to struggle. But Rambourg also said those struggles are all “for the right reasons” as the channel shifts from being promotional to a “more premium destination.”
