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• Nike is the world’s leading sports shoe and apparel business – though it’s currently facing some self-inflicted challenges.
• Sales fell by 12% in its fourth quarter with the gross margin declining by 440 basis points to 40.3% due to higher discounts as the company works through excess inventory. The company will continue liquidating excess inventory over the next two quarters and excess discounting should have largely reduced by the end of the first half in FY 26.
• Pleasingly, the company is accelerating product innovation and is seeing some momentum – including in running, where the company has ceded ground to competitors in recent years. Nike Running grew at high-single-digits for the quarter led by the Vomero 18 running shoe.
• The company says its “focused on returning to sustainable organic sales growth”. If the company’s sales growth improves along with better inventory management, then gross margins should start moving higher.
• Nike’s a marketing machine and new CEO Elliott Hill has set out to deliver “bold, innovative products that set us apart in the marketplace” and reconnect with customers. We reckon its product advantages and investments in marketing could see it win back market share.