Nike Inc (NKE)

• Nike is accelerating strategic actions in key markets like North America and Greater China, with confidence in new leadership and ability to execute aggressive actions to drive growth. -
• The company is rebuilding strong relationships with wholesale partners, delivering innovative products and mutually profitable growth, with positive reception from partners. -
• Nike is confident in its upcoming product pipeline and innovation, particularly in running and basketball, expected to drive growth and offset pressures from repositioning the business. -

• Nike expects significant near-term revenue and margin headwinds due to restructuring and repositioning actions, with revenues projected to decline low double digits in Q3 and even greater headwinds anticipated in Q4 across revenue, margin, and demand creation expenses. - -
• The acceleration of reducing inventory in classic footwear franchises is causing greater sales deceleration, particularly impacting NIKE Digital, and there is uncertainty about when new innovative products will reach sufficient scale to offset this pressure, potentially leading to continued sales declines into fiscal 2026. - -
• Increased competition in key markets like Greater China, from both international and local players, along with a promotional environment, may hinder Nike's ability to return to growth in these regions, adding to the company's challenges in reenergizing brand momentum. -

1. Sales Impact and New Product Timing
   Q: How will new products offset sales pressure in 2026?
   A: Elliott Hill acknowledged that accelerating lifestyle initiatives may pressure 2026 sales but expressed confidence in upcoming products. He highlighted excitement about new offerings in running, training, and sportswear, which are expected to gain sufficient scale to offset pressures as they reach the market in fall '25. Cross-functional teams are effectively bringing innovative products to market, which is the quickest path to returning to health. -

2. Margin Prioritization Over Sales
   Q: Are you focusing on margins before sales, even if sales decline?
   A: Elliott Hill confirmed a focus on achieving healthy margins before driving top-line growth. He emphasized the importance of innovation at scale to replace liquidated products by fall next year. Matthew Friend added that while revenues are expected to be down low double digits and margins down 300 to 350 basis points in Q3, these actions are aimed at returning to a full-price business, which is foundational for future growth. -

3. Near-Term Actions for Long-Term Gain
   Q: Will you take short-term hits to ensure long-term success?
   A: Elliott Hill stated they are acting with a sense of urgency, investing in product innovation, marketing, and marketplace management despite near-term challenges. He believes these moves are necessary to drive the brand forward. Matthew Friend explained that while there are near-term headwinds due to repositioning, they expect these to end as they recalibrate channels and product portfolio, leading to future opportunities once actions are completed. -

4. Regional Strategies: North America and China
   Q: What specific actions are planned for North America and China?
   A: In North America, a new leader, Tom -, is aggressively working on marketplace cleanup, rebuilding wholesale relationships, and elevating NIKE Direct starting in January. In China, they are investing in local product innovation via the Geo Express Lane and the NIKE Sports Research Lab, focusing on creating products "of China for China." They are also resetting consumer-led concepts to drive performance and productivity, partnering closely with Topsports and Pou Sheng. -

5. Inventory Realignment and Growth Timeline
   Q: What's the timeline to realign inventory and return to growth?
   A: Elliott Hill emphasized a focus on five key fields of play—running, basketball, football, training, and sportswear—segmented by men's, women's, and kids'. While not specifying an exact timeline, he expressed excitement about the merchandising opportunities these areas present and indicated that they are a near-term focus, which will unlock incremental growth moving forward. -

6. Margin Recapture and Efficiency Opportunities
   Q: How will you improve margins and efficiency?
   A: Elliott Hill mentioned appointing Venki as Chief Supply Chain Officer to focus on opportunities for margin expansion across factories, transportation, and logistics. Matthew Friend noted that restoring a higher percentage of full-price sales—moving away from the current 50% off-price mix—will significantly improve profitability, especially within NIKE Direct. They are also working to reduce fulfillment costs and rely less on paid media by leveraging brand investments to drive organic traffic. -

7. Investment Phasing and Cost Management
   Q: How are you pacing investments to return to growth?
   A: Elliott Hill outlined plans to shift dollars from performance marketing to brand marketing, investing in key "fields of play" and focusing on five sports and three key countries. Matthew Friend added that despite SG&A being down 3%, demand creation is up 1%, reflecting prioritized investments. They are also making meaningful investments to clean up the marketplace, including liquidating inventory and planning for markdowns, which are reflected in their Q3 guidance and expected to continue in the near term. -

Quarterly guidance for Q3 2025:

• Revenue: Expected to be down low double digits year-over-year - - (lowered from down 8% to 10% - )
• Gross Margin: Expected to decline by 300 to 350 basis points year-over-year - - (lowered from down ~150 basis points - )
• SG&A: Expected to be slightly down year-over-year - - (lowered from roughly flat year-over-year - )
• Other Income and Expense: $30 million to $40 million - (no change from $30 million to $40 million - )
• Fourth Quarter Outlook: Greater headwinds expected in Q4 2025 - - - (no prior guidance)