Nike’s stock shows CEO Elliot Hill’s turnaround strategy is gaining momentum, jumping on after-hours trading on Tuesday after sportswear makers’ quarterly results far exceed Wall Street’s expectations. Estimates compiled by LSEG show that the company’s first quarter revenue rose 1% year-on-year to $117.2 billion, bringing Wall Street forecasts to around $11.7 billion. Earnings per share (EPS) fell 70 cents, down 30% from the same period last year to 49 cents, breaking the consensus of 70 cents, LSEG data show. The shares, which are members of the club’s portfolio, have only been in just a few days, but in extended trading, it rose more than 4% per share to around $72.66. Nike’s shares fell almost 10% in September from its regular session on Tuesday. The reason they own Nike, the global leader of Sportswear, is that they do turnarounds under CEO Elliott Hill. Nike, which Hill is responsible for, focuses on the most important categories in three major regions and five major cities. After paying too much attention to the consumer-oriented business, Nike has returned to its major retail partners to promote sales. Competitors: Adidas, Puma, Lululemon, Holding, Deckers Brands Last Buy: Starting September 26, 2025: On September 26, 2025, Nike’s quarter filled its box score, as far as investment papers are concerned. Turnaround requires management reliability, and the best way to create it is to break the guidance you give to the street. Nike’s results were far better than the guidance provided by executives three months ago. Hill and Co. fell at a single-digit half-digit percentage, with total margin reduced from 350 basis points to 425 basis points, and sales, general and management (SG&A) costs increased at a low-digit percentage. Instead, what actually happened was a 1% increase in revenue, a drop in total margin by just 320 basis points, and the SG&A dollar fell by about 1%. The base point equals 0.01%, so in this case the total margin was reduced by 3.2 percentage points. Another part of our paper where Nike shines is innovation and its “Win Now” initiative, all of which is prioritizing the best performance categories across its major regions. This strategy was still in its early days, but work began to pay off in key areas such as running. There, management launches what is known as a “sports attack” to bring the company’s organization closer to the athletes who serve it. “We’ve returned to providing a ruthless stream of innovation that serves the needs of real athletes, and we’re constantly pulling out the market in a consumer-friendly way,” Hill said in a revenue call. “The early results were positive as Nike Running has grown by more than 20% this quarter,” added Hill, a longtime Nike employee who returned to the company as CEO in October 2024. Also, rather than relying heavily on the direct-to-tumor channel, which was the focus of Hill’s predecessor, John Donahoe, he wanted to return to wholesale businesses like Dick’s sporting goods and Dick-owned footlockers to re-engage their partners. Our joy paid off Nike’s fledgling efforts. The North American wholesale business is expected to return to growth, rising 5% year-on-year, increasing sales with currency neutrality, and continues momentum. In particular, management has called for the success of Amazon’s Nike Brand Store. Hill said it is driving stronger engagement and sales than expected. Nike returned to selling wholesale on Amazon for the first time since 2019 earlier this year. Amazon is a fellow club holding. But like any turnaround, we know that progress is not being made in a straight line. We spoke about this repeatedly in our position at Starbucks. Nike has also admitted this. “We are encouraged by the way we started the year, but progress is not linear and there is still work to do to get back to consistent, sustainable, profitable long-term growth.” Specifically, bringing Nike’s Greater China segment and its Converse brand back to profitable growth is no easy task. Plus, while Nike’s website may not be highlighted, it’s still an important part of the business. Inventory and tariff headwinds must also be managed. Still, we left the revenue call with great confidence in Hill’s plans. Prior to Tuesday’s printing, last week we posted a small Nike position because we wanted to take part in some way, if the turnaround was going well. So we plan to raise our price target from $80 to $85, repeating one rating on par with the purchase, and expanding deeply into this new position. Tariffs Nike is one of many shoe and apparel companies working on President Donald Trump’s evolving tariff policies as Southeast Asia is the hub for manufacturing those products. However, investors are well aware that Nike is making sudden tariff exposures, and investors price the risks on stocks for several months before we arrive. For us, the question is how Nike manages tariffs from here. On Tuesday, Nike said in a revenue call that mutual tariff rates have risen in certain countries since its last revenue call in late June. As a result, management estimates that on an annual basis the total cost to Nike is about $1.5 billion, about $1.5 billion from the previous $1 billion. This will hit the total margin for a fiscal year between 75 basis points and approximately 120 basis points. Nike previously shared that by the end of fiscal year 2026 it is working to alleviate tariff headwinds through initiatives such as optimisation procurement and reducing Chinese footwear imports from 16% to single digits range. A major financial friend said Tuesday that Nike is following the plan. “And I will overcome this confusion with confidence in our strengths, our size and our ability to leverage the deep experiences of our leadership team,” he said. Guidance Here we provide the second quarter guidance Nike Management, which will be offered on Tuesday. According to Factset, this means roughly in line with consensus estimates, a decline of around 3.1% year-on-year. The total margin, which reduces approximately 300 basis points, earns 375 basis points year-over-year, including 175 net headwinds from the new incremental tariffs. This is worse than the basis point reduction analysts of about 225 were modelling, but the main difference seems to be incremental tariffs. The SG&A dollar is the SG&A dollar for a single high digit increase, balancing between accelerated marketing spending that Nike calls demand creation costs and a lower digit increase in operating overhead. This is higher than flat growth estimates. Overall, we are calling quarterly guidance better than feared, mainly due to tariff headwinds. Apart from second quarter figures, the company shared other updates for the remainder of the year. Specifically, Nike said its spring order book has been growing sports-led last year. As a result, the wholesale business is expected to return to modest growth for the entire fiscal year. Again, this is welcome news for us. Because it shows that the pivot to wholesale was the right phone call. Growth in this channel makes the expected decline in Nike’s consumer operations more tolerated. (Jim Cramer’s Charitable Trust is a long nke. See here for a full list of stocks.) As a member of the CNBC Investment Club with Jim Cramer, you will receive a trade warning before Jim can trade. Jim waits 45 minutes after sending a trade alert before purchasing or selling stocks in the Charitable Trust portfolio. If Jim talks about stocks on CNBC TV, he will wait 72 hours after issuing a trade alert before running the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with the disclaimer. Due to receiving information provided in connection with the Investment Club, there is no obligation or obligation of the fiduciary. No specific outcomes or benefits are guaranteed.
