Win, but not now: can Nike get out of its protracted crisis

On Sept. 30, Nike reported revenue growth of 1% to $11.7 billion in the first quarter of fiscal 2026, which ended Aug. 31. The dynamic isn't impressive, but the context is important: revenue growth happened for the first time after five quarters of decline. The last time before that, the company reported a "slight increase" in that metric - about 0.3% - was in March 2024.

Wall Street expected Nike's revenue to be $11 billion.

Shares of Nike rose by 6.4% the day after the publication of a fresh report. And this is despite the fact that the company's net profit for the quarter collapsed by 31% in annual terms, to $727 million.

Earnings per share came in at $0.49, down 30% from the same period a year ago. But this figure also exceeded Wall Street's forecasts of $0.27 per share.

On the eve of the report publication, Jefferies analysts wrote "Just BUY It" about Nike shares. The report, in their opinion, "should become a signal for reversal - the sleeping bear is awakening" and lead to growth of quotations after two years of decrease.

Jefferies reiterated a "buy" recommendation and a target price of $115 for Nike securities, which at the time implied growth of about 65%. In the second half of September, three more investment teams raised the target price of Nike shares: UBS - from $63 to $71, maintaining a neutral rating, Telsey Advisory Group - from $70 to $75 with a "buy" recommendation, and RBC - from $76 to $90, in addition, the bank upgraded the rating of the shares from "hold" to "buy".

What encouraged Wall Street?

Nike's stock has fallen 40% over the past five years. For fiscal 2024, the company reported revenue of $51.4 billion, plus 1%. That was the company's weakest annual growth in 14 years, excluding the first year of the pandemic, The Wall Street Journal reported.

For fiscal year 2025, the company projected a "mid-single-digit percentage" drop in sales, while analysts were counting on 1% growth. Nike's own gloomy forecast caused its stock to plummet 20% on June 28, 2024, with the company losing more than $28 billion in capitalization. It was the worst day in the history of trading in its securities.

One of the reasons for Nike's drop in performance is a decline in demand for its sneakers as consumers have begun to favor newer athletic brands such as On and Hoka.

The company's U.S. market share in the athletic footwear category in 2023 fell to 34.97% from 35.4% in 2021, Reuters wrote , citing GlobalData's 2024 estimates. At the same time, Nike's competitors - Hoka, Asics, New Balance and On - were rapidly increasing their share of the global market.

The Wall Street Journal cited among the reasons for Nike's falling sales the fact that the world-famous company switched from producing athletic shoes to producing limited edition sneakers. As a result, it missed out on the new wave of running popularity, which actively included competitors New Balance, Hoka and Asics.

In addition, the company started dividing everything into segments - women's, men's and kids' - instead of separating by sport, Business Insider wrote. This may have been one of the reasons why Nike's innovation efforts broke down. It focused on lifestyle products and the more mainstream consumer, rather than athletes and their needs, CNBC wrote.

As early as the summer of 2024, Wall Street analysts were already talking about Nike possibly facing a staff reshuffle by the fall of that year. "In retail, if you've had two bad quarters, you tend to get fired," Jessica Ramirez, senior analyst at Jane Hali & Associates, told Reuters.

And in October 2024, Nike did indeed change its CEO. It was Elliott Hill, who had previously worked at Nike for more than 30 years and retired in 2020. He replaced John Donahue, who joined Nike in 2020 from the e-commerce sector (in particular, he worked at eBay).

Donahue wanted to turn Nike into a technology company, so he bet on the digitalization of the business. In the pandemic, the bet on online sales instead of the usual mix of offline retail and wholesale partners worked, but then the strategy started to fail. The sports giant itself admitted it was too aggressive.

As the Financial Times wrote after Donahue's departure, "Wall Street analysts openly questioned whether he was the right executive for Nike: they believed he was not strong enough in product innovation and the development of new, more stylish shoes". Immediately after the news of the leadership change, Nike shares jumped in price by almost 10%, the FT points out.

Upon taking office in October 2024, Hill proposed his Win Now - "win now" - business reorganization concept.

Hill decided to put sports and physical education back in the spotlight, which meant abandoning the division into women's, men's and children's departments and returning to a sport-by-sport distribution.

Innovation and sports, including running, basketball, and soccer, are again a priority. Among the important segments are also the production of sportswear and exercise products. Geographically, he decided to emphasize three key countries for Nike: the U.S., China and the U.K., as well as five cities - New York, Los Angeles, London, Beijing and Shanghai, WWD wrote.

Another of the tasks facing the new CEO is to free up Nike's warehouses. In December 2024, the company reported an inventory of $8 billion - the number of products has increased, but their cost of production has decreased, which is the only reason why this figure has not changed in annual terms. Old models had to be sold at discounts, which inevitably affected profitability.

In the spring of 2025, Hill replaced Nike's president of consumer, product and brand experience, Heidi O'Neil, with Amy Montagne, who had previously led the company's women's division. Hill gave Montagne direct oversight of product development, marketing and growth strategies. Line of business executives now report directly to her. "I am confident that with the new structure and leadership team, we can better unite and capitalize on all the strengths that make Nike a great company," Hill said.

In late August, it became known about a wave of layoffs at Nike - according to CNBC, we are talking about laying off about 1% of the company's employees.

On September 22, Nike launched a major ad campaign in support of the new NikeSKIMS collection in collaboration with the American lingerie and apparel brand founded by Kim Kardashian and Swedish entrepreneur Jens Grede. The first commercial starred more than 50 athletes, including Serena Williams, Sha'Curry Richardson and Jordan Chiles, as well as Kardashian herself.

The first signals that the company's turnaround is slowly but still beginning to bear fruit appeared by the end of this summer. Jefferies notes that traffic at Nike stores turned positive in August - the brand was the only one in the investment bank's sample to show growth in this metric. In the first quarter of fiscal year 2026, Nike's marketing expenditures grew by 9% to $1.63 billion. The company is again betting on sponsorship - in 2026, for example, at the World Cup, many national teams will perform in uniforms from this manufacturer.

However, it appears that Nike's quick wins are not to be expected. The company said it does not expect to resume growth in its direct business - sales through its own distribution channels - in fiscal 2026, CNBC writes.

In addition, the process of clearing warehouses of obsolete models is far from complete. Stocks of products at the end of the last reporting quarter Nike estimated at $ 8.1 billion, in annual terms, they managed to reduce by 2%. The number of units decreased, but this was partially offset by an increase in the cost of goods due to higher duties in North America, the report said.

Hill also noted that the company made progress in three key areas: wholesale, the running category and North America. Sales in North America increased 4% year-over-year to $5 billion, the largest increase among the regions. Wholesale sales grew 7% to $6.8 billion.

However, things are not so good outside of these three areas. Nike's quarterly sales through its own distribution channels (Nike Direct) for the quarter fell 4% year-over-year to $4.5 billion. In China, one of Nike's key markets, revenue fell 9%.

"The seasonal selloff continues to fail. Our plans call for larger investments," Hill told analysts on a conference call following the reporting results.

"While we are already capturing early wins, there is still much work to be done to bring all sports, markets and sales channels on a consistent growth trajectory in a volatile operating environment," Hill was quoted as saying by the company.

The average target price for Nike shares is now $82.1, which implies growth of about more than 10% from current levels. Out of 38 analysts, 17 recommend buying the company's securities, four more have an "above market" recommendation, which is equal to a "buy" recommendation. 15 analysts advise to "hold" Nike shares in the portfolio. Only two advise selling them.

This article was AI-translated and verified by a human editor