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This article first appeared in our sister publication Shop Eat Surf Outdoor (SESO)<\/em><\/p>\n Nike<\/strong>\u2019s turnaround strategy to rebuild its business is showing early signs of success, particularly in its wholesale channel, North American market and the running category, according to executives on the company\u2019s Q1 2025 earnings call Sept. 30. While noting these initial wins, CEO\u00a0Elliott Hill\u00a0and CFO Matthew Friend acknowledged that significant work remains, especially in Greater China, the Nike Direct business and the sportswear category.<\/p>\n \u201cThis quarter, our \u2018Win Now\u2019 actions drove momentum in the areas we prioritized,\u201d Hill said at the start of the call. \u201cFirst, running, North America and\u00a0wholesale partners. It showed that we\u2019re making the right choices, consumers are responding, we\u2019re getting some wins under our belt.\u201d<\/p>\n However, he was quick to temper expectations: \u201cThe truth is, Nike\u2019s journey back to greatness has only just begun<\/strong>,\u201d Hill said. \u201cThere is significant work ahead, especially in the areas of sportswear, Greater China and Nike Direct. And as I said to the team, progress won\u2019t be perfectly linear, but the direction is.\u201d<\/p>\n In reported revenue unless noted otherwise:<\/p>\n Geographically:<\/p>\n A cornerstone of the turnaround strategy is a major internal reorganization dubbed the \u201csport offense.\u201d The company has realigned its structure away from traditional gender-based categories like men\u2019s, women\u2019s and kids\u2019 implemented by previous\u00a0Nike CEO John Donahoe, and is now organized by specific sports.<\/p>\n \u201cThis new formation and ways of working will align our three brands \u2014 Nike, Jordan<\/strong> and Converse<\/strong> \u2014 into more nimble, focused teams by sport,\u201d Hill explained. \u201cWe\u2019ll gain sharper insights to fuel innovation in storytelling and connect with the communities of each sport in more meaningful ways. Collectively, we\u2019ll have a better coordinated attack, with each brand forming a distinct identity and delivering a clear attention to serve different consumers in the marketplace.\u201d<\/p>\n Hill pointed to early successes from this model, citing the redesign of the House of Innovation in New York and a store in Austin, Texas.<\/p>\n Hill emphasized the strategic importance of this change: \u201cIt\u2019s imperative to bring our entire organization closer to the athletes we serve. That\u2019s why the sport offense is going to be so critical to our success. Organizing by sport gives us a much clearer point of view.\u201d<\/p>\n The running category serves as the primary proof point for the new strategy\u2019s effectiveness, Hill said. The running team was the first to adopt the \u201csport offense\u201d structure, leading to clearer consumer insights and product innovation.<\/p>\n \u201cIt turns out runners mostly want three things from their running shoes \u2014 big cushioning, stability or an everyday shoe that returns energy,\u201d Hill shared. \u201cIn response, we\u2019ve moved with a sense of urgency and completely redesigned the Vomero, the Structure and the Pegasus to solve for these three insights.\u201d<\/p>\n This focused approach, integrating innovations like Nike Air, Flyknit and ZoomX, has paid off, he said. \u201cThe early results have been positive, with Nike running growing over 20%<\/strong> this quarter,\u201d Hill said. \u201cOur opportunity is to quickly seize the benefits of a sport offense and apply them to more sports and sport culture.\u201d<\/p>\n The company plans to replicate this playbook in other key areas, including global football, basketball and training. For the upcoming 2026 World Cup, Nike is preparing to launch a new apparel innovation platform and several football-streetwear collections.<\/strong><\/p>\n While encouraged by the progress, executives were transparent about ongoing challenges.<\/p>\n The sportswear division continues to be a weak spot. \u201cOur sportswear teams have work to do to get sharper on the consumers we\u2019re serving, and we see it in our results,\u201d Hill admitted. \u201cOur business continues to decline.\u201d<\/p>\n A key priority is managing the health of its largest classic sneaker franchises.<\/p>\n The Greater China market remains a significant headwind, with revenue down 10% in the quarter. Structural challenges are impacting performance and executives acknowledged the complexity of the turnaround.<\/p>\n \u201cMy leadership team and I were in China a few weeks ago,\u201d Hill said. \u201cIt is even more clear that our path to winning in China is through sport.\u201d<\/p>\n The strategy involves refreshing its 5,000-plus<\/strong> mono-brand stores into distinct sport experiences, but Hill cautioned \u201cthis will take investment and it will take time.\u201d<\/p>\n CFO Friend added that while China inventory levels are improving, \u201cstore traffic and in season sell-through continues to be a headwind\u201d and the digital marketplace remains \u201chighly promotional.\u201d As a result, Friend expects \u201crevenue and gross margin headwinds from Greater China to continue throughout fiscal \u201826.\u201d<\/p>\n The Nike Direct business, particularly the digital channel, is also under pressure. Revenue for Nike Direct (stores plus online) was down 5%<\/strong>, with Nike Digital declining 12%<\/strong>. The company made a \u201cstrategic decision to become less reliant on classic franchises and pull back on our promotions for the long-term health of our brands and marketplaces.\u201d<\/p>\n Friend explained the consequences: \u201cOrganic traffic continues to decline double digits. Traffic comps will remain under pressure and so we do not expect Nike Direct to return to growth for fiscal \u201826.\u201d<\/p>\n The strategy aims to reposition Nike Digital as a full-price business, which has helped rebuild trust with wholesale partners.<\/strong><\/p>\n Converse is in the early stages of a reset. Its classic Chuck Taylor franchise is undergoing a \u201cglobal market reset.\u201d Friend stated that \u201cConverse is under new leadership\u00a0and resetting its marketplace and brand. Therefore, we expect revenue and gross margin headwinds from Converse to continue throughout fiscal \u201826.\u201d<\/p>\n A significant factor impacting Nike\u2019s financial outlook is the rising cost of tariffs, and Nike is now expecting a bigger hit.<\/strong><\/p>\n \u201cWith the new rates in effect today, we now estimate the gross incremental cost to Nike on an annualized basis to be approximately $1.5 billion<\/strong>, up from the $1 billion we shared 90 days ago,\u201d Friend said. \u201cGiven the magnitude and timing of the most recent rate increases, we now expect the net headwind in fiscal \u201826 to increase from approximately 75 basis points to 120 basis points<\/strong> to gross margin.\u201d<\/p>\n For Q2 Fiscal 2025:<\/strong><\/p>\n For Full-Year Fiscal 2026:<\/strong><\/p>\n Despite the mixed results and ongoing challenges, Nike\u2019s leadership expressed confidence in their strategy. The focus is on executing the \u201cWin Now\u201d actions while embedding the \u201csport offense\u201d across the organization.<\/p>\n \u201cWe\u2019re confident that the Win Now actions are the right things to move us in this direction,\u201d Friend said, referencing the long-term goal of returning to double-digit margins.<\/p>\n Hill concluded the call by reinforcing the team\u2019s commitment: \u201cWe are in the early stages and our comeback will take time and our progress won\u2019t be linear,\u201d he said. \u201cOur teams are energized, they\u2019re inspired and they\u2019re ready to compete. We\u2019re getting back to leveraging Nike Inc.\u2019s unmatched portfolio of brands, sports and countries to drive deeper consumer connections and profitable, sustainable growth.\u201d<\/p>\n<\/p><\/div>\nQ1 Fiscal 2025 Results<\/strong><\/h2>\n
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The \u2018Sport Offense\u2019 Reorganization<\/strong><\/h2>\n
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Running Leads the Way in Nike\u2019s Turnaround<\/strong><\/h2>\n
Areas Requiring Improvement<\/strong><\/h2>\n
Sportswear and Classic Franchises<\/h5>\n
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Greater China<\/h5>\n
Nike Direct<\/h5>\n
Converse<\/h5>\n
The Financial Picture: Tariffs and Outlook<\/strong><\/h2>\n
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A Path to Recovery<\/strong><\/h2>\n