We came across a bullish thesis on NIKE, Inc. on Valuations’ Substack. In this article, we will summarize the bulls’ thesis on NKE. NIKE, Inc.'s share was trading at $64.38 as of January 19th. NKE’s trailing and forward P/E were 37.65 and 41.32, respectively according to Yahoo Finance. Nike (NKE) is widely regarded as the most iconic apparel and footwear brand globally, commanding dominant market positions across basketball and running, with 85% share in basketball footwear and 65% of NBA players wearing ...

Core Viewpoint - NIKE Inc. is expected to report a decline in both revenue and earnings for the second quarter of fiscal 2026, reflecting ongoing challenges in the market and strategic transitions [2][3][18]. Financial Performance - The Zacks Consensus Estimate for NIKE's fiscal second-quarter revenues is $12.2 billion, indicating a 1.7% decline year-over-year [3]. - The estimated earnings per share for the same quarter is 37 cents, representing a significant decline of 52.6% from the previous year [3]. - In the last reported quarter, NIKE achieved an earnings surprise of 81.5%, beating the consensus estimate by an average of 53.7% over the trailing four quarters [4]. Strategic Initiatives - NIKE's "Win Now" strategy aims to restore brand energy and position the company for sustainable growth after a period of underperformance [6][17]. - The company is focusing on disciplined execution, supply-chain optimization, and strategic pricing to enhance margin recovery [10][17]. Regional Performance - North America remains NIKE's strongest region, with projected revenues of $5.2 billion for the second quarter, reflecting a modest growth of 0.5% year-over-year [8]. - In EMEA, revenues are expected to rise by 1.7%, while Greater China is projected to see a decline of 12.7% in revenues, amounting to $1.5 billion [9][11]. Margin and Cost Pressures - NIKE anticipates a gross margin decline of 300-375 basis points, influenced by higher tariffs and increased promotional activity [12][13]. - SG&A expenses are expected to rise in the high-single digits due to increased demand creation investments [12][13]. Stock Performance and Valuation - NIKE shares have decreased by 6.2% over the past three months, underperforming the industry and the S&P 500 [14][15]. - The current P/E ratio of 31.47X exceeds the industry average of 28.06X and the S&P 500's average of 23.35X, indicating a potentially pricey valuation [16]. Long-term Outlook - NIKE's strategic initiatives are designed to strengthen its competitive position and drive long-term growth, despite facing near-term challenges [17][19]. - The company is navigating a difficult demand environment, particularly in lifestyle categories and Greater China, which may impact short-term performance [18][20].

Core Viewpoint - Nike Inc. is facing a challenging financial landscape as it prepares to report second-quarter fiscal 2026 earnings, with CEO Elliott Hill indicating that the path to recovery will not be straightforward [1] Group 1: 'Win Now' Strategy - Nike's 'Win Now' strategy, focusing on Running, North America, and Wholesale, has shown early success, with the Running category increasing over 20% in the first quarter due to revamped franchises like the Pegasus and Vomero [2] - The spring wholesale order book is up, indicating that retail partners are regaining confidence in the brand [2] Group 2: Revenue and Supply Challenges - Management has intentionally reduced the supply of classic franchises such as the Air Force 1 and Dunk to maintain brand health, which has negatively impacted immediate revenue [3] - Organic digital traffic has slowed by double digits as promotional activities have been limited [3] Group 3: Financial Headwinds - For the second quarter, management expects revenue to decline in the low single digits and gross margins to contract significantly by 300 to 375 basis points [4] - Tariffs are projected to cost the company $1.5 billion annually, compounded by a 10% revenue decline in Greater China last quarter [4] Group 4: Analyst Sentiment - Analysts at Raymond James express caution, noting that a stock re-rating is unlikely until there is a clearer inflection in revenue and EBIT% [5] - Stifel maintains a 'Hold' rating, highlighting that shares are trading at a premium of approximately 25 times FY27 earnings, suggesting that the market has already priced in a recovery that has not yet fully materialized [6] Group 5: Stock Performance - NKE shares fell 0.97% to $67.12, but have increased by 8.43% over the last six months; however, the stock has declined by 11.3% year-to-date [7] - The stock exhibits a weaker price trend over the medium and long term but shows a strong trend in the short term, with a poor quality ranking [7]

Core Viewpoint - NIKE Inc. is expected to report a decline in both revenue and earnings for the second quarter of fiscal 2026, with revenues projected at $12.2 billion, a 1.7% decrease year-over-year, and earnings per share estimated at 37 cents, reflecting a 52.6% decline from the previous year [1][2][10] Financial Performance - The Zacks Consensus Estimate indicates a revenue drop to $12.2 billion and earnings of 37 cents per share for the fiscal second quarter, marking a significant decline from the prior year [2][10] - In the last reported quarter, NIKE achieved an earnings surprise of 81.5%, exceeding consensus estimates by an average of 53.7% over the last four quarters [3] Earnings Expectations - NIKE has an Earnings ESP of -3.79% and a Zacks Rank of 3, suggesting that the likelihood of an earnings beat is low for this quarter [4] - The company is facing challenges in the Sportswear segment due to the deliberate phase-out of aging franchises, which is expected to create revenue softness [11] Regional Performance - North America remains NIKE's strongest region, with projected revenues of $5.2 billion for the second quarter, indicating a modest 0.5% year-over-year growth [7] - In EMEA, revenues are expected to rise by 1.7% as inventory levels normalize and the focus shifts to profitability [8] - Greater China is projected to see a significant revenue decline of 12.7% year-over-year, with revenues estimated at $1.5 billion, reflecting ongoing structural weaknesses [12] Margin and Cost Management - NIKE anticipates a gross margin decline of 300-375 basis points, influenced by higher tariffs and increased promotional activity [13] - SG&A expenses are expected to rise in the high-single digits due to increased demand creation investments [14] Stock Performance and Valuation - NIKE shares have declined by 6.2% over the past three months, underperforming the industry and the S&P 500 [15] - The current stock price of $67.78 reflects a 29.6% increase from its 52-week low but is 17.8% below its 52-week high, with a forward P/E ratio of 31.47, higher than industry and S&P averages [19] Strategic Initiatives - NIKE's "Win Now" strategy aims to restore brand energy and position the company for sustainable growth, focusing on operational resets and improved wholesale partnerships [5][21] - The company is adapting to market dynamics through innovation-led product launches and enhanced consumer engagement [21][23] Challenges Ahead - The company faces near-term challenges, including weak demand in lifestyle categories, elevated SG&A costs, and the impact of new U.S. tariffs [24] - Management's cautious outlook highlights the difficulty in balancing short-term financial pressures with long-term strategic goals [22][24]

Core Insights - NIKE Inc's first-quarter fiscal 2026 results indicate progress in rebuilding momentum, particularly in the running category, which grew over 20% due to redesigned franchises resonating with consumers [1][8] - However, the overall performance remains uneven, with significant softness in the Sportswear segment and a 30% decline in classic footwear in North America [2][3] Performance Summary - The running category was a standout performer, driven by franchises like Vomero, Structure, and Pegasus, supported by the company's "Sport Offense" strategy [1] - North America saw a 4% growth, bolstered by stronger wholesale trends, helping stabilize the top line despite a cautious consumer backdrop [1] - In contrast, Sportswear continues to struggle, particularly in Greater China, where revenues fell 10% and NIKE Digital dropped 27% due to marketplace headwinds [2][3] Competitive Landscape - Key competitors include adidas AG and lululemon athletica inc., both of which are showing signs of recovery and growth in various segments [4][5][6] - adidas is regaining momentum with strong demand for lifestyle franchises and improved performance in running and football, while lululemon benefits from strong brand equity and international expansion [5][6] Valuation and Estimates - NIKE shares have declined 14.7% over the past three months, slightly worse than the industry's decline of 13.7% [7] - The company trades at a forward price-to-earnings ratio of 29.58X, higher than the industry's average of 26.33X [9] - The Zacks Consensus Estimate indicates a year-over-year earnings decline of 23.6% for fiscal 2026, but a growth of 50.9% is expected for fiscal 2027 [10]

Core Viewpoint - Wells Fargo has raised its price target for Nike from $60 to $75, indicating a potential upside of 15% from current levels [1] Revenue Insights - The primary challenge for Nike has been the decline in sales from classic footwear lines, which is estimated to have cost around $6 billion over the past two years, but there is an expectation for stabilization moving forward [2] - Non-classic footwear has shown significant growth, with an acceleration in growth rates reaching approximately 20%, while apparel sales are also increasing [3] Consumer Behavior - There is a noticeable bifurcation in consumer spending, particularly in the U.S., with concerns about the upcoming holiday season being challenging [5] - However, early 2026 may present some positive factors, such as tax refunds and stimulus payments, which could lead to increased discretionary spending on items like sneakers and handbags [6] Product Innovation - Nike's recent product innovations, particularly in the performance running category, have been successful, contributing to improved visibility for the brand [6] Market Dynamics - The situation in China remains challenging, with a surplus of products in the marketplace and a need for strategic reevaluation. China accounts for 15% of Nike's sales, while North America represents 50%, which is performing well [8][9] - The cleanup of inventory in China is not expected to be completed until summer 2026, but this could lead to additional margin opportunities and growth in the following fiscal year [9]

Investment Rating - The investment rating for the industry is "Outperform the Market" (maintained) [1][5]. Core Insights - The report indicates that Nike's Q1 FY2026 performance shows a strong recovery momentum, with revenue and gross margin exceeding management guidance and Bloomberg consensus expectations. The revenue for Q1 was $11.7 billion, representing a year-on-year increase of 1%, while on a constant currency basis, it declined by 1% [2][4][7]. - The report highlights that while short-term adjustments and tariff impacts persist, certain regions and product categories are showing signs of recovery. North America led the growth, while the Greater China market and Converse brand continue to face pressure [3][4][7]. Summary by Sections Performance and Guidance - FY2026 Q1 revenue and gross margin were better than management's previous guidance and Bloomberg consensus expectations. The Q2 revenue guidance is expected to decline in the low single digits. Short-term adjustments and tariff impacts are ongoing, but some regions and categories are showing recovery signs [3][4][7]. - The revenue for FY2026 Q1 was $11.7 billion, with a year-on-year increase of 1% and a constant currency decline of 1%. North America and wholesale channels drove growth, while the Greater China market and Converse brand faced ongoing pressure [2][4][7]. Regional Performance - North America showed strong performance with a revenue increase of 4% year-on-year. The Greater China region experienced a significant decline of 10%, impacted by reduced foot traffic and a highly promotional environment [4][16][17]. - The EMEA region's revenue grew by 1%, while the Asia-Pacific and Latin America regions saw a 1% increase in revenue [4][16][17]. Product and Channel Performance - The report notes that the running category performed well, with growth exceeding 20%, while classic shoe models continued to decline. Overall shoe revenue saw a reduced decline of 2%, and apparel revenue turned positive with a growth rate of 7% [9][8]. - In terms of channels, the direct-to-consumer (DTC) revenue declined by 5%, primarily due to a 12% drop in digital sales, while wholesale revenue increased by 5% [8][9]. Management Guidance - For Q2 FY2026, management expects wholesale revenue to recover modestly, while direct-to-consumer revenue is not anticipated to recover. The Greater China region and Converse brand are expected to continue exerting pressure on revenue and gross margin throughout the fiscal year [31][32]. - The gross margin is projected to decline by approximately 300 to 375 basis points, with new tariffs contributing about 175 basis points to this decline [31][33]. Investment Recommendations - The report recommends focusing on high-quality suppliers and retailers within the industry chain, particularly Shenzhou International and Huayi Group, as well as core retailer Taobo, which is expected to benefit from Nike's recovery and increased new product ratios [34].

Core Insights - Nike's Q1 FY2026 financial report indicates signs of recovery with revenue of $11.7 billion, a slight increase of 1% year-over-year, surpassing market analysts' expectations [2] - The dealer business generated $6.8 billion in revenue, significantly exceeding the $4.5 billion from direct sales, becoming a key driver of growth [2] - Global inventory decreased by 2% to $8.1 billion, with a notable 11% reduction in Greater China, reflecting effective inventory management [2] Strategic Actions - Under CEO Elliott Hill's leadership, Nike has focused on "sports" as the core strategy, implementing the "Win Now" plan through organizational restructuring, product innovation, market ecosystem restoration, brand value redefinition, and localized execution [3] - Organizational restructuring aimed to refocus Nike on "sports" by breaking down business units into sport-specific segments, allowing for targeted efforts in running, basketball, and soccer [4] - The team has successfully rebuilt relationships with wholesale partners, recovering lost market shelf space and driving the dealer business back to growth, with dealer revenue accounting for over 58% of total revenue [5][6] Inventory Management - Effective inventory management has been a critical component of the "Win Now" plan, with global inventory assets decreasing to $8.1 billion and significant improvements in inventory turnover efficiency [6] - The reduction in inventory levels for previously over-reliant classic series like Air Force 1 and Dunk has created space for seasonal product replenishment and new product launches [6] Brand Value Rebuilding - Nike is focusing on brand value reconstruction by emphasizing key sports moments and increasing innovation investments, leading to a gradual recovery in brand visibility since mid-2024 [7] - Recent marketing initiatives, including collaborations with top athletes and immersive experiences, have reinforced Nike's commitment to its core "sports" identity [7] Future Growth Strategy - Despite the positive Q1 FY2026 results, Nike acknowledges the complexity of recovery across different business areas, emphasizing that progress will not be linear [9] - The "Win Now" plan will continue to drive strategic focus, product innovation, and channel optimization to support comprehensive recovery across all categories and regions [10] Product Innovation - Nike is intensifying investments in core categories such as running, basketball, and soccer, with new product launches aimed at enhancing competitive advantage [11][12] - The company is also targeting women's and children's markets with innovative products and collaborations, expanding its reach in these segments [14][15] Financial Outlook - Capital markets are showing optimism regarding Nike's long-term profitability, with RBC upgrading its rating to "outperform" and raising the target price to $90, anticipating significant revenue contributions from the 2026 World Cup [16] - The resilience of Nike's supply chain, with production expanded to multiple countries, positions the company to better withstand market fluctuations and policy risks [16] Conclusion - Over the past year, Nike has laid a solid foundation for transformation, with a focus on the "Win Now" plan, core category innovation, and leveraging upcoming events like the World Cup to drive sustainable growth [17]

Core Viewpoint - NIKE Inc. (NKE) has experienced a decline in stock performance, falling below key technical indicators, indicating bearish sentiment and a shift in investor confidence [1][2][9]. Stock Performance - NKE shares have lost 6.3% over the past three months, underperforming the Zacks Shoes and Retail Apparel industry's decline of 2.5% and the broader Zacks Consumer Discretionary sector's fall of 1.8% [6]. - The stock closed at $68.91 on October 8, 2025, below its 200-day simple moving average (SMA) of $69.13, and has also traded below its 50-day SMA since September 5, 2025 [1][2][10]. - Compared to competitors, NKE's performance is weaker, with Wolverine World Wide and Steven Madden seeing gains of 29% and 30.2%, respectively, while NKE outperformed adidas AG, which declined by 12.8% [7]. Strategic Transition - NIKE's ongoing transition, driven by the "Win Now" strategy, aims to shift focus from aging products to innovation-led performance items, which has created a revenue headwind as the company clears old inventory [11][12]. - The first-quarter fiscal 2026 results highlighted revenue declines in critical markets like North America and Greater China, attributed to promotional activities and local competition [12]. - Despite challenges, NIKE's fundamentals remain strong, with growth in performance categories like Running and Global Football indicating potential for future consumer engagement [21]. Financial Metrics - NIKE's current forward 12-month price-to-earnings (P/E) ratio stands at 34.64X, significantly higher than the industry average of 29.76X and the S&P 500's average of 23.65X, raising concerns about valuation [15][17]. - The Zacks Consensus Estimate for fiscal 2026 indicates a 0.2% year-over-year revenue growth, but a 23.2% decline in EPS, while fiscal 2027 estimates suggest 5.7% revenue growth and 56.4% EPS growth [23]. Investor Sentiment - The stock's current trading position below both the 50 and 200-day SMAs reflects cautious investor sentiment, with a delicate balance between optimism for long-term growth and skepticism regarding near-term execution risks [24][25]. - Given the elevated valuation and lack of near-term growth visibility, it may be prudent for investors to wait for signs of revenue stabilization and margin recovery before making new investments [25].

Financial Data and Key Metrics Changes - Revenues for the quarter were up 1% on a reported basis and down 1% on a currency-neutral basis [20] - Gross margins declined 320 basis points to 42.2% due to higher wholesale discounts, increased product costs, and channel mix headwinds [21] - Earnings per share was $0.49 [21] - Inventory decreased 2% versus the prior year, indicating progress towards a healthier marketplace [22] Business Line Data and Key Metrics Changes - Nike Direct was down 5%, with Nike Digital declining 12% and Nike stores down 1% [21] - Wholesale grew 5%, indicating a positive trend in that segment [21] - The running business grew over 20% this quarter, showcasing strong performance in that category [9] - Sportswear continued to decline, with a 30% drop in classic footwear franchises [23][15] Market Data and Key Metrics Changes - North America revenue grew 4%, with wholesale up 11% [22] - Greater China revenue declined 10%, with Nike Digital down 27% and Nike stores down 4% [25] - EMEA revenue grew 1%, with Nike Digital down 13% and Nike stores up 1% [24] - APLA revenue grew 1%, with Nike Digital down 8% and Nike stores down 5% [26] Company Strategy and Development Direction - The company is focusing on the "Sport Offense" strategy, which aims to align teams by sport for better consumer insights and innovation [6] - There is a commitment to improving the sportswear segment and addressing challenges in Greater China and Nike Direct [15][17] - The company is investing in innovative products and emotional storytelling to connect with consumers [19] - The goal is to serve consumers across multiple channels, including specialty sporting goods and Nike Direct [63] Management's Comments on Operating Environment and Future Outlook - Management acknowledges a cautious consumer environment and tariff uncertainties impacting business recovery [19] - There is confidence in the Win Now actions and the potential for growth, particularly in North America [19] - The company expects Q2 revenues to be down low single digits, reflecting ongoing challenges [30] - Management remains focused on long-term health and profitability despite short-term pressures [34] Other Important Information - The company is facing a significant cost headwind from new tariffs, estimated at approximately $1.5 billion annually [28] - The strategic decision to reduce reliance on classic franchises and pull back on promotions is aimed at long-term brand health [18] - The company is actively working on refreshing retail environments and improving consumer experiences in Greater China [70] Q&A Session Summary Question: Can you help us think about the spring order book in the context of the holiday book? - Management noted that the spring order book is positive and reflects growth across North America, EMEA, and APLA, offsetting headwinds in Greater China [39][44] Question: How is the current marketplace in September trading? - Management indicated that the environment is dynamic, with good sell-throughs for recent product launches, but they are closely monitoring consumer behavior [49][51] Question: Can you elaborate on the early wins in North America and running? - Management highlighted a 20% growth in running and positive momentum in North America, attributing success to the Win Now actions and the Sport Offense strategy [57][59] Question: How much of the pressure in Nike Digital is due to reduced promotions? - Management confirmed that the organic traffic decline is primarily due to strategic repositioning and reduced promotional activity, with a focus on building momentum with wholesale partners [63][66] Question: What strategies are being used to turn the digital business in China? - Management emphasized leading with sport, innovative products, and local athlete activations to improve the digital marketplace, while also focusing on store refreshes [68][70]