Nike isn’t turning the corner just yet. The sports gear giant’s quarterly results this week showed a company still tripping over its own unforced errors, undercutting whatever progress it’s made toward a comeback.
Nike shared some positive news in its earnings report on Tuesday, notably modest growth in North America, where revenue rose 3%. The bump reflects gains in Nike’s key footwear business and its mended relationships with the wholesalers it dumped a few years ago.
But big sales declines in China, the loss of market share in areas like running shoes to brands such as On and Hoka, and the revenue free fall at Nike’s Converse brand cast a shadow over the bright spots. Nike CEO Elliott Hill and his team gave a cautious financial forecast for the current quarter in a tough macro environment. Nike finance chief Matthew Friend told analysts, “Our consumer is under pressure around the world.”
Consumer sentiment is an easy scapegoat, but Nike’s own missteps are partially responsible for its slower-than-expected rebound too; they’re only making the comeback a steeper climb.
Nike committed a major headline-grabbing blunder ahead of the Boston Marathon in April, when it launched an ill-advised ad campaign that appeared to mock slower runners. Elite runners power Nike’s marketing, but millions of slower runners fuel its massive business, and Nike can ill afford to risk insulting those customers.
Another mishap occurred ahead of the World Cup, when Nike failed to supply many U.S. stores with enough merchandise. The error raised Wall Street concerns about Nike’s operational prowess, specifically its ability to get popular items in front of customers in a timely manner.
With its latest earnings report, Nike did itself another disservice by unexpectedly dialing back some disclosures in its financial results, such as a breakdown of sales by gender. The decision added to the sense that it doesn’t have a full handle on its problems and is not forthcoming enough. “Pulling back on yet another disclosure is a red flag to us particularly since women’s was supposed to be a long-term growth driver,” BNP Paribas Equity Research senior analyst Laurent Vasilescu wrote in a note on Wednesday. Nike, whose customer base has long skewed male, has been trying for years to make greater inroads with women, and the reduced transparency could lead analysts to conclude those efforts have hit a wall.
Nike shares fell on the earnings report Tuesday and are down 75% from their all–time high five years ago. They are down by about half since Hill became CEO in 2024.
“Nike’s problems are more deep-seated than previously acknowledged and, consequently, the turnaround is taking much longer than anticipated,” wrote GlobalData managing director Neil Saunders in a research note.
Hill admitted in a moment of candor this spring that he was frustrated with the pace of improvement too. “I’m so tired, and I know you are too, of talking about fixing this business,” Hill told Nike staff in April. “I want to move to inspiring and driving growth and having fun.”
The longtime Nike employee came out of retirement in 2024 to rehabilitate the sports gear giant, equipped with a deep knowledge of company operations, culture, and how to motivate the rank and file. Hill is reversing the decisions of his predecessor, John Donohoe, to de-emphasize crucial wholesale accounts with partners like Foot Locker and prioritize fashion and lifestyle over sports performance gear. He’s also working to revive Nike’s ability to create innovative new products for everyday people, many of whom are athletes themselves, and its knack to appeal to a wide clientele, both demographically and by sport. (Nike’s broad reach is how it generates $46 billion a year in revenue, a multiple of what rivals like Lululemon Athletica, Under Armour and On do.)
He must also put China on firmer footing. Revenue in the region was down 12% last quarter from the same period a year earlier as consumers drifted toward local brands. Hill said Nike would be looking to adapt its offering in China to local tastes and “move at the speed of the Chinese consumers.” Nike’s problems in China have led to large amounts of unsold inventory, something that will pinch margins for a long while.
Hill has positioned Nike’s turnaround as a show-me story that will ultimately pay off provided the company stays the course. “The opportunity is consistency, execution across every part of the portfolio. From here, we have to prove it every season,” Hill said on Tuesday.
Hill’s larger comeback strategy will take time to take hold; the one thing the company can prove right now is that it can get out of its own way.
