Nike’s Reality Check

0:07Hello and welcome to The Debrief from the Business of Fashion, where each week we delve into our most popular BOF professional stories with the correspondents who created them. I'm executive editor Brian Baskin. And I'm senior correspondent Sheena Butler-Young. When Elliot Hill took the helm at Nike in October 2024, he inherited a company in the midst of one of its worst slumps in years. A longtime Nike insider, Hill returned with both credibility and a daunting turnaround ahead. His early moves centered on refocusing the business on sport and rebuilding relationships with wholesale partners, and they seem to show some traction.

0:43But the market's response to Nike's latest earnings suggests that confidence in the brand is now in short supply. I actually got a note from an analyst right before we recorded this with the subject line rearranging the deck chairs, which is not a good sign. But with Nike, the question is never about capability. The brand still has product, innovation, and unmatched scale. What it hasn't fully regained is a clear, compelling narrative, one that convinces consumers and investors that the next chapter is really worth buying into. Today, we're joined by BOF's Mike Sykes to unpack why Nike's recovery feels unfinished, what the brand is doing to win back public opinion, and what it would take to make people believe again.

1:22Mike, welcome to The Debrief. Thanks for having me. It's good to be back. So Mike, let's start with the basic disconnect that's at the heart of your latest story. So Nike, its CEO, Elliot Hill, said the company is seeing its foundation get stronger, but the stock market is looking at something else. Why didn't investors react the way they did on the heels of these recent results, which was a really significant sell-off? What was the reason? It seems to me that investors are just sort of running thin, running a little thin on patience with Elliot Hill. It's like Nike continues to preach that the comeback that it's been saying is coming for now a year and a half at this point is on the cusp.

2:05And it's been there for all this time. And there just seems to be a little bit of investors are just like I said, they're just losing patience. You've got Elliott Hill talking about how they have wins in North America and running and wholesale. And these are like small points that do matter ultimately, but they don't really reflect that well in the brand's bigger picture. It's not at this point anyway. And just to add some context here, we're talking about the company's fiscal third quarter results, which came out earlier in April. And they showed that revenue was basically flat on the year. And, you know, within it, there were some wins like wholesale, like you mentioned.

2:47But it seemed like that just wasn't enough. And I guess just to follow up on Sheena's question, it's not like these results were so out of step with what they've been reporting for the last year or so. Why did suddenly investors decide, you know, we can't accept flat sales anymore? Again, I think it is just a matter of investors deciding that this is the moment where, you know, you guys, for the second quarter, Ernest Cole, Elliot Hill was saying that they were in the middle innings. And so when you get to the third quarter, it's like, OK, if we were in the middle innings then, then where are we right now?

3:22Can't still be the middle innings. And we can't still have these same issues that we were talking about three months ago that are still problems right now. And, you know, whether that's fair or not is, I guess, not really up to me to judge. It sort of is an investor thing and how they feel. But to me, it is very clear that people are sort of a bit on edge. And I think what also contributes to that a bit here is the fact that there are so many elements that are out of Nike's control through, you know, geopolitical unrest and the uncertainty when it comes to tariffs and things like that. It's like there are so many things that they can't control.

4:04And the things that they can control are not looking, I guess, more positive than people anticipated to this point. Then it's like, why should we believe in this company moving forward through this next quarter? Especially when they're telling you in the fourth quarter, like, our numbers are going to be down low single digits. That's just not, you can't really get ringing endorsements from people when you're talking like that. Yeah, it seems like that's the other component here is their outlook wasn't showing that there was going to be any growth in the near future. So to extend that tortured baseball metaphor that that that Elliot Hill had kicked off, you look at who's on deck, you know, and there and there's nothing there that says, okay, this is how they're going to pull it off.

4:48Or is there? I mean, to me, I think there are things there that I would say are definitely more positive than I thought they would be. Like to Elliot Hill's point, I guess, like I did not foresee their business in North America doing as well as it is right now. And I do think that the decision to sort of rebuild their relationships with wholesalers is a part of that. And I think that is a big positive for the company to build on. And I do think that they are trying new things in new spaces where people have asked them to try things. Right. Like everybody likes to point to running as sort of Nike's baseline.

5:32That's like the first thing that Nike was ever really good at is running. Right. And so for the company to return to its previous self, they need to be good at that again. And I think Nike has legitimately gotten good at running again. Like that's a positive category for the brand now. And so when you look at those things, there's promise there, right? Whether that's enough is, again, not up to me, but there are some things to hang your hat on. So, you know, the interesting thing I always say when we talk about Nike is that we have to always put it in the context of what does a Nike grade problem look like?

6:04I'm always like chuckling in my head and it's like Nike is so underperforming. This is really, really, really bad. And you're like, they only made$70 billion last year. Like, it just, I think sometimes it just doesn't make sense to the layperson, and maybe I'm the layperson here. But what would investors have wanted to see? What would have been an exciting quarter and an exciting outlook that would have changed the direction of this stock post earnings results? I think the reaction would have been so different if there was even just a speck of positive momentum in China or with Converse, really.

6:38If there was just any sort of sign of Converse not being the ball and chain that people are saying it is, that critics and investors are saying it is, or that the business in China is, it doesn't have to be, you know, completely turned around, but at least like let's get into some positive directions. Like there just was nothing. And so when you look at that and you sort of take the messaging that Nike has been giving people, consumers and investors, for this last year and a half, it just kind of feels like there's a lot of talk and maybe not necessarily enough proof. Like people just want to see something right now.

7:20That's something that's confused me a bit is I've heard that same talk from Nike, from Hill, from any executive that you've talked to, you know, even their marketing, that big things are coming. And then they never seem to release anything that feels as big as the talk. And I guess I wonder, like, what do you think they think is meant to be the catalyst? To be honest, I think in talking with people from the brand, like they think a lot of things should be the catalyst, right? I wouldn't say that Nike, people at Nike are so gung-ho about their product right now that they think everything should be a hit, but they do identify a lot of positive things that they are doing.

8:01Again, going back to the running category, the Vimero Premium and Pegasus Premium are doing really well right now. They have a number of pretty interesting collaborations that are out there that people seem to have been excited about. The whole Air Max 95 revamp or whatever you want to call it is people are into that right now. There's the Nike Mine 001 that people can't seem to buy or get enough of one way or another. There are just a number of things that they would call innovations that I think the brand itself is very positive about. And for whatever reason, there just seems to be still a bit of disconnect between what the brand thinks about its product and what consumers think about its product.

8:52And investors, I think, are in the middle of that and seeing that disconnect and saying, oh, if this is what they think is working well and it's not really working well, then why should I continue to put money into this? I think that's the sort of fundamental question that a lot of investors are asking themselves right now. Your story makes a really important point that, you know, Nike will probably for the foreseeable future have a lot of scale. But what's really missing is that sort of brand heat, like being seen as the cool brand right now. How much of that can they manufacture? Because there is like such heat around brands like from like a Hoka to a Sockney to fill in the new balance.

9:33Is it that those brands are just seeing, do they just seem more niche, more interesting, and Nike just can't find its way into that conversation? Has the heat moved elsewhere? I would definitely say the heat has moved elsewhere, and it's not necessarily concentrated in one place. It's in a bunch of different places, which makes it harder, I think, for it to coalesce back into one place when it comes to Nike, which is ultimately what Nike wants. Because when the brand is at its peak, it always is the elephant in the room, right? It's the thing that everybody loves to talk about. And there hasn't been necessarily one hero product or thing or mission, vision, whatever you want to call it.

10:14There hasn't been that one thing to sort of bring people back and rally them around Nike entirely. And to your point, Sheena, Nike is still bigger than every other sportswear brand out there right now. But I think right now it is a brand operating sort of in the midst of this overall playing field. Like it is closer to playing the games that, you know, Adidas plays or New Balance plays or whatever, where they're putting out interesting things that some people like, some people don't like it. And whoever is going to like it is going to hold on to it. But when Nike is at its best, it is not participating in the conversation, it is controlling the conversation.

10:56And I just don't really see that in, I won't say not necessarily the near future, because there is a spot where I do think Nike has an opportunity to sort of take control of a narrative and maybe blow it up a little bit. But like, it's just not happening right now. I guess what I'm saying in another way is that, is the market fundamentally different then? Like the Nike that could have owned the market 10 years ago, does that space no longer exist? Is it just this fragmented, like, Audi has a hot moment this month and then Softney next month and a new balance the month after? Like, does the market that Nike thrived in still exist in 2026?

11:39Yeah, I think that's a really good point that you're making. I don't think that market exists in 2026. And I think, if I could cite a previous story, the sneaker of the year story that Leigh and I did, it sort of really hit that point. There were so many different shoes that were a part of that conversation, but there wasn't necessarily one that anybody could agree on that was the sneaker of the year, right? And usually that's something that comes down to whatever big brand had the best marketing campaign for their most hyped sneaker, right? And usually in the past, that has been Nike and it just wasn't this year.

12:18There were just so many options for people to choose from it. And so I think with the marketplace looking like that, it is very hard for a brand like Nike to, again, control that conversation in the way that they may have been able to 10 years ago, 15 years ago. I would say even five years ago at this point.

12:40We'll be back with more of The Debrief right after this.

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14:33Let's talk about what they did 10 years ago. So, you know, when they were, I don't think their problems were quite as severe as they are today, but they weren't doing amazing. They had some new competition coming up and then the 10 happens and it changes the narrative. And it did exactly what you both have been saying, which is it basically redefined the stakes in the market. And those stakes were all built around what Nike was saying, as opposed to all these up and coming brands that had been nibbling away at their market share. Tell us why it worked then and whether they could do something, have one big idea that could work now.

15:08Yeah, I think the thing about the 10 was that it was so innovative and fresh and new without actually like taking something and building something completely different than what people had seen before. Because if you look at the 10, the thing that Virgil Abloh did with that was he would just make these small design tweaks. He would just undo the finish on the Jordan 1 tongue or put text on the side of the shoe or just make a rougher version of Nike's Air Presto and put that out to market. And that was something that was like, it just modified these classic popular models just enough to make them into something that people wanted to collect.

15:55And then there were 10 pieces, right? Well, I guess initially there weren't 10 pieces. I think it was like nine or eight, if I remember correctly. But like, whatever, there was a collection there for people to sort of participate in and search for and try and earn in a way where like you don't really have anything like that now. And even if you built something like that, I'm not quite sure it would work in the way that it did then because it would probably feel like something that was just like piggybacking off of the tent, right? It's not necessarily like the new thing. And people are looking for the new thing or the next thing.

16:32But I think also with that, Nike also had a bit of a foundation before the 10 was launched. Before that, you had the Roche run craze that was in, I think that was 2014, 2015, around that time, just a little bit before the Adidas Ultraboost run. And people were very into those. is you had the Air Max 270 that was a foundational piece for Nike. And a lot of people still wear that shoe today. And you don't really have that foundation right now, but I think that's something that Elliott Hill and company are attempting to build right now. Although it's funny because you started off with that word innovation and you know who loves that word is Elliott Hill.

17:17And I was, my favorite new thing to do is look at how often something comes up in an earnings call. And that word was used 15 times by Nike executives in their last earnings call. And yet what you're basically saying is they haven't released anything that strikes consumers as truly innovative in this latest cycle. Why? If I'm being honest about innovation, I don't really think people know what that is or what it is that they're looking for when they talk about it. People say innovation, but what they really mean is that they want something new, something fresh. And that doesn't necessarily have to be a new model that comes out of nowhere or something that you hadn't seen before.

18:03If you look at Adidas, their innovation was tripling the production of the Adidas Samba when it was hot and just doing the smart thing. Yeah, exactly. It's just like it is it is taking something that people haven't seen for a while and something that people are at the same time interested in and in giving them that thing. Right. And so I think that for Nike right now, innovation has been actually about building new and interesting things. Like if you look at their running category, there are a lot of new silhouettes there. You look at the Nike Mine line, that is a new concept in Nike's footwear that we haven't seen before.

18:44Like they have built legitimately new, interesting and quote unquote innovative things. But those are not the things that people want to see, I don't think. At least that's what the consumer is selling us with their dollars. at this point. Should we look no further than the Gen Z's Michael Jordan, Kim Kardashian and Skims? It's funny because I feel like in our conversation, we're doing that thing that fashion people do when we talk about these campaigns or these innovations. It's like, we're trying to quantify like this it factor, this luck thing. Like they're doing almost to the letter, all the things that you would say a company should do to engineer a turnaround or a comeback.

19:29Like try new things, you know, bring in, you know, the person, one of the people that was at the heart of your heyday 15 years ago. Like there's a lot of boxes that are being checked and then something's just not hitting. Yeah. The problem is I think that only really works when you, when you can't see the work behind it. Like that's the magic, right? Is I think a lot of these moments that we call luck actually were just as engineered as this, but it doesn't feel quite so mechanical. And I think that's, if, you know, if I had to put my finger on like what feels off about this Nike turnaround is that we're talking about it so much.

20:04Like you almost don't want to, you don't want them to be walking through every step and announcing these restructurings. And, you know, I think they just got to like, they just got to do it. Just don't release any earnings reports that we can't see the numbers behind it. Well, if the Trump administration has its way, they won't have to. So that problem solved. I mean, I think that those are very good points. And I do feel like there's a lot of engineering going on behind the scenes. Like, I know that for a fact that there's a lot of engineering. That people are like Nike is building the products that they believe that people want.

20:47And ultimately, I think that is a necessary step in this, even if it isn't working right now, because eventually you have to have a foundational product. When Adidas went through their whole teardown, when it separated itself from Yeezy and they had to find the way back, it wasn't about finding what that next big collaborator was going to be. It was about building a foundation and setting a standard for Adidas brand. What categories are we good at? What is our next foundational model? Where can we find our small wins? And I think Nike is doing that right now. I think they have, again, like the running category is well off.

21:35At least it seems to be right now. The wholesale stuff seems to be working. I think there's plenty of opportunity when it comes to basketball and specifically women's basketball, especially when you think about like Caitlin Clark's signature shoe is coming up in September. I believe it's reported at this point. But they have to go back to Elliott Hill's baseball analogy. You have to hit the singles before you can hit a grand slam, right? And so if they keep hitting these singles, even if it isn't at the rate that investors want it to be at, I think ultimately it is a positive thing for the brand.

22:13Like ultimately, they still have to hit that grand slam eventually. Like you can't strike out when it's time to win the game or whatever. This analogy is going way too far. I mean, like if someone's not doing it. I feel so bad for our European listeners right now. I feel so bad for me right now. What are you talking about? Let's talk baseball. Let's keep going. Oh my gosh. They just have to find their thing. That's all I'm saying. What you said is sort of what I was getting at. I think that if you look at the playbook or the strategy and you compare it to any other sneaker brand or sportswear brand that appears to be thriving right now, I don't know that we can pull one thing out and say, well, Nike's really getting that wrong and that brand's really getting it right.

22:55I think it's the singles, right? But I think it is like it's a matter of probably at this point doing a lot of the right thing continuously and then eventually something hits. I think that's right. And I think that that is the right strategy for any brand, even if you're not like in the middle of a turnaround or whatever, a crisis, whatever you want to call it. Like, I think if you want to establish yourself, because I mean, this is what Nike was good at back in its heyday. Really, it had the top level hits, but it would always like there was always things underneath that that would just work.

23:30And those things aren't working now. You have to find things that work before you can sort of play in big games. Yeah. And it's possible, it's probable actually, that a lot of these smaller moves that have contributed to investors losing patience because they say, oh, another single, another single, where's that grand slam? I think that all does add up after a while. And maybe it creates that foundation for whenever that big idea comes, whenever that inspiration strikes, they just have a solid base to build it off of. And that's the beauty of being Nike, too, is they have near infinite runway to work with because they're not going anywhere.

24:05As bad as things are, you know, company, you know, sales are enormous. They're bigger than probably their next three rivals combined. They have a long way to go before you can say it's a true existential crisis. And that gives them months, years, decades to come up with the next big thing. With that said, I do think you still have to you've got to figure out this converse thing. and you definitely have to figure out China because that's a big market for Nike. Well, talk more about Converse. We've mentioned it a couple of times, but why is that such a big deal for them? Because it's a big deal because the brand has so much money invested into it.

24:43This is a legacy footwear brand that Nike, I want to say that the sales were at 300 million in their last quarter or something like that. It has the potential to be a boon for the brand. The same way that like if the Adidas Reebok partnership worked out, then like that's something that even if your brand does fall on hard times, like you still have this to fall back on. This is the way that I've always viewed Converse, especially considering that like this is a classic brand with a classic silhouette in the Chuck Taylor that never seems to go away. And so I think if that works, then you've at least got something to stand on, in my opinion.

25:29But there are also things that you can do with it, like what they're doing now with Shea Gildress Alexander, where you introduce a new basketball model or you bring in skateboarding names and throw some skateboarding athletes over there. It just gives them the opportunity to be more versatile. And right now, I think that versatility just isn't there for the brand. And also, it kind of is just a drag on Nike's overall sales numbers. It just isn't very good or productive right now. Okay, so I hear you clearly on this, Mike. So for the most part, Nike doing most things that would make a sneaker brand successful.

26:08They're doing most of those things right. Two big issues, Converse, China. Those are the two big question marks. What is the next big turning point look like for Nike? What does good look like next? What can we expect that would be good? So I guess we can't say that the next big turning point will be the fourth quarter for Nike because they already told us that that won't be good. I think right now the moment that I'm looking at for Nike is this investor day that they have coming in the fall. Like they are saying the people at the brand have made it clear that this is when they will make things for Converse.

26:44They will announce big things for China. They have big things coming down the pipeline that people would be interested in. This is going to be post-World Cup also. So we'll get, I think, a better picture of how the World Cup impacted Nike's financial outlook at that point. And that's going to come in the fall in 2026. But I think that's technically their first quarter of fiscal 2027. Or it will be around that time. Because there's not an exact date for the investor day yet, but they're saying it'll be in that fall time. So we're really looking at the fall, I would say, as the next big point for Nike.

27:24And they are seemingly hoping for big wins. I have no idea what it's going to look like. But I know investors are certainly hoping that by then things will be a bit clear as far as this turnaround goes. All right. And we'll have you back then to talk all about it. Looking forward to it. Mike, thank you so much for joining us today. Thanks for having me. It's been a pleasure. If you'd like to hear more of Mike's thoughts on Nike, on all things sports and sneakers, you should subscribe to his newsletter, The Kicks You Wear, at businessoffashion.com. You've been listening to The Debrief, produced and added by Olivia Davies and Eric Ria.

28:01I'm Sheena Butler-Young. And I'm Brian Baskin. We'll be back next week with a new episode. Thanks so much for joining us and be sure to follow us wherever you get your podcasts.