Core Insights - Nike announced a significant organizational restructuring plan on December 2, 2025, which included the elimination of the Chief Technology Officer (CTO) and Chief Commercial Officer (CCO) positions, and the reinstatement of the Chief Operating Officer (COO) role, filled by Venkatesh Alagirisamy [1] - The restructuring is part of the new CEO Elliott Hill's "Win Now" strategy aimed at addressing the company's recent decline [1] - Following the leadership changes, Nike's subsidiary brand Converse is undergoing a major restructuring and layoff plan, indicating deeper issues within the brand [2] Financial Performance - Nike's Q2 FY2026 revenue was $12.4 billion, a 1% increase year-over-year, but net profit fell by 32% to $792 million, with a gross margin of only 40.6% [2] - Converse's revenue peaked at $2.43 billion in FY2023 but has since declined significantly, with FY2024 revenue at $2.08 billion (down 14%) and FY2025 further dropping to $1.7 billion (down 16%) [2] - In FY2026, Converse's Q1 revenue plummeted by 28%, and Q2 saw a 31% decline, resulting in only $300 million in quarterly revenue [2] Profitability Concerns - Converse's EBIT fell from $209 million in 2022 to $15 million in 2023, and by Q2 FY2026, it reported a loss of $4 million, marking a complete collapse in profitability [3] - The drastic 44% cut in marketing budget has not improved financial conditions but has instead weakened brand competitiveness, creating a vicious cycle of reduced budget leading to lower exposure and declining sales [3] Brand Comparison - In contrast to Converse's struggles, the Jordan brand is experiencing steady growth, benefiting from a strong cultural influence and clear positioning [4] - Converse's operating profit margin is only 6.54%, with a net profit margin of 5.43%, both of which are declining [7] Systemic Issues - Converse's financial troubles stem from multiple factors, including unclear positioning, outdated image, and declining cultural relevance [7] - The brand's reliance on a single product line, particularly the Chuck Taylor All Star, has become a burden, as the market demands both classic and innovative offerings [12] Strategic Outlook - Nike's current strategy focuses on cost-cutting and core business concentration, making it unlikely to invest heavily in Converse's brand revitalization [8] - The probability of Nike selling Converse in the long term is higher than that of successfully revitalizing the brand, as the "Win Now" strategy prioritizes immediate performance improvements [13][14] - Historically, Nike has divested underperforming non-core brands, and Converse's current performance aligns with the criteria for such divestiture [14]