Is It Time to Just Buy Nike Stock as a Turnaround Takes Hold?

Core Viewpoint - Nike's new CEO Elliott Hill suggests that the company has turned a corner after reporting fiscal fourth-quarter results that exceeded low expectations, leading to a surge in stock price despite a year-to-date decline and a more than 20% drop over the past five years [1][2]. Group 1: Leadership and Strategy - CEO Elliott Hill is focused on reversing the previous leadership's missteps, particularly those of former CEO John Donahoe, who emphasized classic footwear and direct-to-consumer sales at the expense of innovation and wholesale relationships [4][5]. - Hill's "Win Now" action plan aims to restore Nike's commitment to innovation, reorganizing the business to enhance sports-specific innovation across its main brands: Nike, Jordan, and Converse [5][12]. - The company is also working to rebuild relationships with wholesalers, including a new partnership with Amazon to offer a select assortment of Nike products [6][12]. Group 2: Financial Performance - For fiscal Q4, Nike's revenue fell 12% to $11.1 billion, with Nike brand revenue down 11% to $10.8 billion, and Nike Direct revenue decreasing 14% to $4.7 billion, largely due to a 26% drop in digital sales [9][10]. - The company experienced a significant decline in gross margins, which fell 440 basis points to 40.3%, attributed to heavy discounting and declining sales [10]. - Earnings per share (EPS) plummeted 86% in the quarter to $0.14, reflecting the overall financial challenges faced by the company [10]. Group 3: Market Segmentation and Future Outlook - Nike is implementing sharper marketplace segmentation to cater to different customer price points while positioning its digital platforms and stores as premium destinations [7][8]. - Despite current weak results, Hill expresses optimism for future improvements, indicating that the groundwork is being laid for a potential turnaround [12]. - The stock is currently trading at a high valuation with a forward P/E ratio of around 39 times analysts' 2026 estimates, but if EPS can return to previous levels, the stock could trade at under 20 times earnings [13].