Nike’s Earnings Collapsed 86%... And to Make Matters Worse, Bill Ackman Didn’t Stick Around to Watch

When Bill Ackman dumped his entire Nike position after months of hyping it as his next great value play, you’d think something was up. And (surprise!) something was very, very up.

What do you know? Nike just posted its worst quarterly earnings in three years. That’s a big deal considering this was supposed to be the comeback. The “we’ve cleaned house, reorganized the supply chain, and now everything’s amazing” quarter. Instead, it looked more like a garage sale where nothing sold and your neighbor called the HOA on you.

Let’s start with what went less wrong. Nike reported $11.1 billion in revenue, which (yes) beat analyst expectations. But only because the bar was already resting somewhere below sea level. Despite the beat, revenue was still down 12% year-over-year. Not exactly what you want when you're supposed to be pulling off a brand refresh.

(Source: Wall Street Journal)

And get this… net income dropped 86%. They made $211 million in profit this quarter, compared to $1.5 billion a year ago. At that point, you start to wonder if LeBron secretly signed with New Balance. (He didn’t, but you’d forgive investors for checking.) And like any Transformers sequel… it gets worse, louder, and somehow more disappointing. Earnings per share came in at a sad 14 cents, down from 99 cents. And this was the “turnaround” quarter, remember?

CFO Matthew Friend called this Nike’s “largest impact” from restructuring efforts. Almost as if saying, “Yeah, we had to do it… we did this to ourselves so that we can start printing money soon. Don’t worry.” Which is kind of like hearing your cousin (who just relapsed and got married in a Vegas drive-thru) tell you they’ve got everything under control. Sorry to break it to you, Matt, but yeah… we’re all still worried.

But the hits didn’t stop there. New tariffs on Chinese imports are expected to cost Nike about $1 billion this fiscal year. Their plan to combat it of course is to shift some manufacturing, raise prices, and "work with partners.” (In other words: cross fingers, pray consumers don't notice.) Good luck with that… especially when the average shopper is still battling sticker shock at the grocery store. Raising shoe prices when people are already debating if they need lunch is… a bold strategy, Cotton.

Then there’s the direct-to-consumer play. Remember when Nike dumped wholesale partners to go all-in on their own stores and website? At the time, it was pitched as revolutionary… cut out the middlemen, increase margins, total brand control. But now that digital sales are down 26%, and wholesale revenue dropped 9%, it’s starting to look less like a power move and more like a strategic walk of shame. So now, Nike is crawling back to Macy’s, Urban Outfitters, and yes… Amazon, the platform they broke up with in 2019. To quote Thanos: “You couldn’t live with your own failure. And where did that bring you? Back to me.”

To be fair, Nike says sales will only decline by mid-single digits next quarter (we’ll see). While that’s a little better, gross margins are still getting clobbered… down 4.4 percentage points this quarter, with another 3.5 to 4.25-point drop expected next. It’s like telling Dave Ramsey, “I’m still a million dollars in debt, but I got a 10% raise… so now I make $11 an hour.”

And while management is talking up innovation (like new product drops and a delayed Skims collab with Kim K) Nike’s still losing market share to brands like Hoka, On, and Lululemon, which seem to have cracked the code on what Gen Z actually wants (comfortable running shoes). Ackman’s exit didn’t spark this mess… but it might’ve been the clearest warning shot Wall Street got all year. When your loudest bull goes silent before the company posts a historic earnings collapse, things are not going great.

At the time of publishing this article, Stocks.News holds positions in Amazon as mentioned in the article.