“Be a grower not a shower…” - Nike CEO Elliot Hill to investors…

Nike is sly for this one… seriously. After completely sandbagging the whole “we expect a mid–single digit percentage drop in sales in the quarter”, Swoosh-land has posted a 1% revenue growth. Shares, of course, are ripping nearly 5% on the day because of it. 

(Source: Giphy) 

With that said though, while Nike pulled a fast one on analysts, the momentum isn’t all that it seems. For one, profits cratered 41% while gross margin got absolutely kneecapped to oblivion. Additionally, tariffs alone are now expected to rip $1.5B out of Nike’s flesh this year. The company is basically paying protection money to Trump’s trade war, but framing it as “temporary headwinds.”

(Source: CNBC) 

However, wholesale was up 7%: i.e., dumping stale Jordans on Foot Locker and praying sneakerheads can’t tell the difference between a re-release and a clearance rack… while North American sales were up 4%. Bigly. Other than that, here’s the corpse rot Nike hopes you ignore: Direct-to-consumer was down 4%. The grand Donahoe-era pivot collapsed because it turns out the middleman actually did something. Additionally, Converse plummeted 27% while China slid 9%. 

And yet, CEO Elliott Hill keeps calling this a turnaround when the deeper issue is that Nike simply doesn’t hit like it used to. For example, the Jordan Brand has already been milked to death. Dunks have been oversaturated into meme stock territory. The “House of Innovation” in NYC is basically a sneaker mausoleum for tourists. Meanwhile, Adidas can still at least stunt with Yeezy reruns and Messi jerseys. But then again, Wall Street, of course, loves the theater. Analysts are busy rewriting their notes from “Nike is cooked” to “Nike is regaining momentum.” The stock jumps $10 billion in market cap overnight because investors are so desperate to believe the Swoosh still carries cultural gravity. Spoiler: it doesn’t. It carries inertia.

(Source: Giphy) 

Meaning, as of right now, Nike’s future is less about innovation and more about managing a graceful decline while it finally gets its sh*t together. Plus when you factor in bleeding tariffs, discounting stale inventory, leaning on wholesale, and praying Americans never stop buying Air Max to walk around Costco… that narrative becomes even more clear. 

But, but, but… as we are seeing today, the market doesn’t care. Nike proved the bar is so low it’s underground… and as long as Beaverton doesn’t trip on it, Wall Street will keep handing them trophies. Which means, keep your eyes on Nike and place your bets accordingly. Until next time, friends… 

At the time of publishing, Stocks.News does not hold positions in companies mentioned in the article.