Nike's Slow Climb Back

A year in, a 12-year low, and the case for staying long

I bought Nike too early.

Yes. I will be the first to say that I was too early in Nike.

I was overly excited with the appointment of CEO Elliott Hill and the turnaround story of the legacy brand.

I knew it was a turnaround and I knew turnarounds take time, but I underestimated what a distribution-led turnaround actually requires — which is to say I underestimated almost everything that matters about how Nike runs its business.

When a company’s competitive advantage runs through how it sells, where it sells, who it sells to, and how that ecosystem reinforces itself over decades, the rebuild isn’t a turnaround in the usual sense.

It’s an overhaul of the operating model itself, and that takes years… not quarters.

Q3 FY26 (CY Q1) was the quarter that made that reality unavoidable for me, and it’s also the quarter that, in my read, marked the floor.

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The Beat Nobody Cared About

The earnings report itself wasn’t bad.

• Revenue of $11.28B came in ahead of $11.24B

• EPS of $0.35 beat the Street’s $0.29

• Gross margin landed 0.4% above consensus.

None of that mattered, because the Q4 guide was ugly.

Management estimated Q4 revenue (next fiscal quarter) to be down 2-4%, against Street estimates calling for positive growth. Greater China was also guided down approximately 20%.

JPMorgan downgraded the next day and cut its price target from $86 to $52, and twenty other analysts followed inside two trading sessions.

Not good.

The stock fell more than 15% the day after and hit a 12-year low of $43.17 forty-eight hours later.

12 years ago was when the iPhone 6 launched…

Also not good.

A distribution-led turnaround that's also a brand reset is structurally different from the kind most retail investors are used to seeing.

When the problem is the product, you can fix it in a design cycle. 18 months and a few good launches and the story can turn around.

When the problem is how you reach the consumer and what they think of you when you get there, you're untangling years of decisions compounded together over time.

Too much sold direct. Too little shelf space at wholesale. Aged Classics clogging the marketplace. Wholesale partners lost trust. Digital pricing that trained the consumer to wait for a discount. And a brand that drifted from sport toward lifestyle while HOKA and On built credibility in the lanes Nike used to own.

Every one of those issues feeds the others, and you can't fix one in isolation without making another worse.

• Pull sell-in down to clean the marketplace and revenue plummets.

• Push promotions to move inventory and you reinforce the discounting habit.

• Rebuild wholesale relationships and DTC margins suffer during the transition.

This is the spot Nike has been in, and the slowest-moving piece is Greater China, where Matt Friend (CFO) was honest enough this quarter to call the challenges "structural".

I think this statement rattled some investors, and honestly, Friend fback itand the team should have put that on the record a year ago.

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Where is the Floor?

Underneath the ugly numbers and guidance, the operational picture IS doing what the team originally explained during the announcement of the Nike “Win Now” strategy.

North America gross margin fell (3.6%) on the surface but absorbed a (6.5%) tariff hit in the process, which means the underlying gross margin actually expanded by roughly +2.9% in the most important geography Nike operates in.

North America wholesale also grew 11%, Running was up over 20% globally, and February was the first month in 2 years where every channel in North America posted positive growth simultaneously.

Friend (CFO) gave the market the one number I wanted on the call: gross margin expansion begins in Q2 FY27, with Q1 FY27 as the final quarter of material tariff headwind.

As a reminder, Q2 FY27 for Nike is Oct-Dec of CY2026 (Q4)

I’d watch for Nike to deliver there.

In addition, late this year is when the “Win Now” actions are scheduled to be complete and the deliberate revenue drag from clearing aged, underperforming inventory falls off.

Elliott Hill (CEO) closed the call with a Camp Nou metaphor (FC Barcelona’s home stadium). Skim the quote if you don’t want to read in its entirety:

“Before we move to your questions, I want to leave you with an image that stayed with me from this quarter. I was in Barcelona meeting with athletes and leaders from FC Barcelona, a partner of ours since 1998, and I stood on the pitch at Camp Nou. If you’ve ever been there, you know it is more than a stadium. It is one of the most imposing stages in sport, a place built for pressure, belief, and unforgettable moments. And right now, Camp Nou tells another story, too.

Above the pitch, there is scaffolding. In the corners, there are cranes. Entire sections are unfinished. The stadium is being rebuilt tier by tier, piece by piece to accommodate over 100,000 supporters. The work is still underway. Capacity right now is limited and it requires patience and perseverance. And still, the supporters are in full voice. The players are still stepping on to the pitch focused on competing and winning. And all around them, the work is transforming what their home, their club will become.

What stayed with me was the reality of both things being true at once, competing today while building for tomorrow. FC Barcelona did not choose between performing in the present and preparing for the future. They are doing both at the same time. Standing there, looking up at the half-built stadium, it occurred to me, this is NIKE right now. We are taking deliberate actions that we believe will restore the health and quality of our business even when these actions create pressure in the near term.

We are removing what is not working. We are rebuilding parts of the foundation that needed to be rebuilt. And at the same time, we are continuing to innovate, to compete and to create for the future. That takes conviction. It takes patience, it takes belief, and it takes focus. Camp Nou is being rebuilt for the next — not being rebuilt for the next match, it is being rebuilt for the next era.

That is exactly how I think about the work we are doing at NIKE. I came back to help return this company to greatness and to build it the right way for the long term, to protect what has always made NIKE special and to modernize it for a new generation of athletes and consumers. So while the work is not finished, the direction is clear. Our focus is clear. And our comeback is within reach. And this fall, we look forward to sharing a fuller view of that path ahead at our Investor Day.”

That’s a fantastic, confident and patient response after a tough investor call.

Hard not to respect that response from Elliott Hill. He’s handling the pressure the right way.

That’s a CEO who isn’t pretending the timeline went as planned, and the recent insider buying could back it up.

• Hill bought roughly $1.0M of stock at $42.27 on April 13

• Tim Cook bought $1.06M at $42.43 three days earlier

There has been notable selling as well.

Bill Ackman (Pershing Square), who had been long on the turnaround since 2024, exited Pershing Square’s entire Nike position in late 2025 at approximately a 30% loss.

This is a contradiction worth naming. Trying to say only bulls are showing up at the bottom would be incorrect.

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What I’m Actually Doing Here

Nike isn’t the asymmetric opportunity I thought I was buying a year ago.

It’s a staple consumer brand in the middle of a multi-year operational rebuild, and the stock is going to move slowly upward through late Q3 and Q4 of this calendar year as the “Win Now” actions complete, inventory health normalizes, and the China drag stabilizes.

I believe the floor on this business is meaningfully higher than the recent trading has implied.

Now, none of that adds up to a stock that doubles in twelve months.

Rather, it equates to a stock that grinds back over the next eighteen.

So I’m long, but I’m not adding, and I’m not selling.

Nike has become a value anchor in the portfolio rather than a high-conviction growth bet. It’s a position I hold because the floor is visible.

Sure, there are better short-term opportunities, and I’m putting capital toward them elsewhere. But every portfolio needs a couple value names to anchor the portfolio. Nike has become one of them for me.

The work is taking longer than I’d like, too.

But the direction is clear.

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