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The Business of Fashion Podcast
Nike’s Reality Check
00:26:27
BoF’s Mike Sykes explains why Nike’s recovery under Elliott Hill still feels incomplete and examines why investor patience is wearing thin.
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Transcript60 lines
- [00:00]
Mike Sykes
Foreign.
- [00:08]
Brian Baskin
Hello, 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.
- [00:19]
Sheena Butler Young
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.
- [00:35]
Brian Baskin
His early moves centered on refocusing the business on sport and rebuilding relationships with wholesale partners. And they seem to show some traction. But 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.
- [00:57]
Sheena Butler Young
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. Mike, welcome to the debrief.
- [01:24]
Mike Sykes
Thanks for having me. It's good to be back.
- [01:27]
Sheena Butler Young
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, it's 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, which was a really significant sell off? What was the reason?
- [01:47]
Mike Sykes
It seems to me that investors are just sort of running thin, running a little thin on, on patience with, with Elliot Hill, it' he continues to preach that the comeback that it's been, you know, saying it's coming for now a year and a half at this point is on the cusp and it's been there for, 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 Elliot 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 at, it's not at this point anyway.
- [02:33]
Brian Baskin
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, but 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?
- [03:05]
Mike Sykes
Again, I think it is just a matter of investors deciding that this is the moment where, you know, you guys in for the second quarter earnings call. Elliot Hill was saying that they were in the middle innings. And so when you get to the third quarter, it's like, okay, if we were in the middle innings, then, then where are we right now? Can't still be the middle innings. And we, we can't still have these, these same issues that we were talking about three months 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 and 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, 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. Like, that's just not, you can't really get ringing endorsements from people when you're, when you're talking like that.
- [04:29]
Brian Baskin
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. Or is there?
- [04:50]
Mike Sykes
I mean, to me, I think there are things there that I would say are, are definitely more positive than, than I thought they would be like, to Elliot Hill's point, I guess, like, I, I did not foresee their, their business in North America doing as, as well as it is right now. And I do think that the, the decision to, to sort of rebuild their, their relationships with, with wholesalers is, is a part of that. And I think that is a big positive for the, for the company to build on. And I do think that they are trying new things and 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. That's like the first thing that Nike was ever really good at is running.
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Progressive Insurance Announcer
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Mike Sykes
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.
- [05:58]
Sheena Butler Young
So. You know, the interesting thing I always say when we talk about Nike is that we have to always put in the context of what does a Nike grade problem look like? I'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, 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 Ear.
- [06:29]
Mike Sykes
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, if 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 doesn't have to be completely turned around, but at least like, let's get into some positive directions. Like, there just was was nothing. And so when you, when you look at that and you sort of take the messaging that, 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.
- [07:21]
Brian Baskin
That's something that's confused me a bit, is I've heard that same talk from Nike from, 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?
- [07:43]
Mike Sykes
To be honest, I think in talking with people from the brand, like, they think a lot of things should be, 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 like a lot of positive things that they are doing. Again, 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 is people are into that right now. There's the, the Nike Mine 001 that people can't seem to, to buy or get enough of one way or another. There are just a number of, of things that they would call innovations that I think the brand itself is, is very positive about. Right. And for whatever reason, there just seems to be still a bit of disconnect between what, what the brand thinks about his product and what consumers think about his product. And investors are, 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.
- [09:11]
Sheena Butler Young
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, 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 Saucony to fill in the new balance. Is it that those brands are just seen, do they just seem more niche, more interesting and Nike just can't find its way into that conversation. Has the heat moved elsewhere?
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Mike Sykes
I would definitely say the heat has, has moved elsewhere and it's not necessarily concentrated in one place. It's in a bunch of different places. Which, which makes it harder I think, for it to coalesce back into one place when, when it comes to, to Nike, which is ultimately what, what Nike wants. Because when the brand is at its peak. It, it, it always is the, the elephant in the room, right? It's the thing that, that everybody loves to, to talk about. And there hasn't been necessarily one hero product or thing or mission, vision, whatever you want to call it, there hasn't been that one thing to sort of bring people back and rally them around Nike entirely. And to your point, Sheena, like, 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, that, that some people like, some people don't like it and, and whoever is, is going to like it is going to hold on to it. But when Nike is, is at its best, it is not participating in the conversation, it is controlling the conversation. And I just don't really see that in, I won't say not necessarily the near future because, because there is a, a spot where I do think Nike has a, has an opportunity to sort of take control of, of a narrative and maybe blow it up a little bit. But like, it's just not happening right now.
- [11:17]
Sheena Butler Young
I guess another, 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, Adi has a hot moment this month and then saucony next month and a new balance the month after? Like, does the market that Nike thrived in still exist in 2026?
- [11:40]
Mike Sykes
Yeah, I think that that's a really good point that you're making. I don't think that market exists in, in 2026. And I think in. If I could cite a previous story, the sneaker of the year story that, that lay, and I did like, it sort of really hit that point. Like there were so many different shoes that were, were part of that conversation, but there wasn't necessarily one that anybody could agree on that that was the sneaker of the year, right? And something that comes down to whatever big brand had the best marketing campaign for, for their most hyped sneaker, right? And usually in the past that has been Nike and it just wasn't this year. It was just there were just so many options for people to choose from it. And so I think with, 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 have been able to 10 years ago, 15 years ago, I would say even five years ago at this point.
- [12:41]
Brian Baskin
We'll be back with more of the debrief right after this
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- [14:17]
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- [14:27]
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Mike Sykes
law
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Brian Baskin
let's talk about what they did 10 years ago. 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 they, 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.
- [15:34]
Mike Sykes
Yeah, 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. Right. Because like if you look at the 10, the thing that, what Virgil Abloh did with that was like he would just make these like small design tweaks. Like he, he would just undo the finish on, on the, the Jordan One tongue or like put text on, on the side of the shoe or, or like just make a, a rougher version of, of Nike's Air Presto and, and put that out to market. And that was something that was like, it was, it would, it just modified these, these classic popular to make them into something that like people wanted to, to collect. And then there were 10 pieces, right? There were. 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, for people to, to sort of participate in and search for and, 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, it would probably feel like something that was just like piggybacking off of, of the 10. Right. It's not necessarily like the new thing and people are looking for the new thing or the next thing. But I think also with that Nike also had a bit of a foundation before the 10 was launched. Right. Like you, before that you had the Rocher run craze that was in, I think that was 2014, 2015, around that time, just a little bit before like the Adidas Ultra Boost run and like people were very into those. 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 Elliot Hill and company are attempting to build right now.
- [17:37]
Brian Baskin
Although it's funny because you started off with that word innovation, and you know who loves that word, is Elliot Hill. And 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?
- [18:06]
Mike Sykes
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. Right. Like, people say innovation, but what they really mean is that they want something new, something fresh. Right. And that doesn't necessarily have to be a new model that comes out of nowhere or that something that you hadn't seen before. Right. Like, if you look at Adidas, like 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 taking something that people haven't seen, seen for a while and something that people are at the same time interested in and 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. Like, they have built legitimately new, interesting, and quote, unquote, innovative things. But those are not the things that. That people want to see. I don't think, at least that that's what the consumer is telling us with. With their dollars at this point.
- [19:30]
Sheena Butler Young
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. 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, like 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.
- [20:07]
Brian Baskin
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, 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. Like, you almost don't want to, you don't want them to be walking through every step and, and announcing these restructurings. And, you know, I think they just got to, like, they just got to do it.
- [20:41]
Sheena Butler Young
Just don't release any earnings reports that we can't see the numbers behind it.
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Brian Baskin
Well, if the Trump administration has its way, they won't have to. So that problem solved.
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Mike Sykes
I mean, I, I think that those are very good points. And I do feel like there is a, there's a lot of engineering going on behind the scenes. Like, I know that for, 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. And 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 tear down, 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. Like, 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, the running category is well off, at 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 Elliot 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, you know, investors want it to be at, I think ultimately it is a positive thing for, for the brand. Like, ultimately they still have to hit that grand slam eventually. Like, you can't strike out when, when it's time to, to win the game or whatever, this, this analogy is going way too far.
- [22:48]
Sheena Butler Young
I mean, like, if someone.
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Brian Baskin
For our European listeners, I feel so
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Sheena Butler Young
bad for me right now, you talking about.
- [22:56]
Brian Baskin
I was, oh, let's talk baseball.
- [22:58]
Sheena Butler Young
Let's keep going.
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Mike Sykes
Oh, my gosh, they just have to, to find their, their thing. That's, that's all I'm saying.
- [23:04]
Sheena Butler Young
What you said, sort of what I was getting at. I think that if you look at the, the playbook or the strategy and you compare it to any other sneaker brand or sportswear brand that is, that appears to be thriving right now, I don't know that we can pull one thing out and say what, Nike's really getting that wrong and that that brand's really getting it right. I think it's, it's, 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, the right thing continuously, and then eventually something hits.
- [23:32]
Mike Sykes
I think that's right. And I think that that is the right strategy for, 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, to establish yourself, because, I mean, this is what Nike was good at back in his heyday, really. It had the top level hits, but, but it would always, like, there was always things underneath that that would just work, and those things aren't working now. You have to find things that work before you can sort of play in big games.
- [24:02]
Brian Baskin
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, think that that all does add up after a while and, and maybe it creates that foundation for when 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. As 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.
- [24:47]
Mike Sykes
With that said, I do think you still have to, You've got to figure out this Converse thing and you, you definitely have to figure out China, because that is a, that's A big market for Nike.
- [24:57]
Brian Baskin
Well, talk more about Converse. We've mentioned it a couple times. But why is that such a, I mean, why is that such a big deal for them?
- [25:03]
Mike Sykes
Because it's a big deal because the brand has so much money invested. Get into it. This is a legacy footwear brand that Nike. I want to say that the sales were at 3,300 million in, 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, if your brand does fall on hard times, like, you still have this to, to fall back on. This is the way that, that I've always viewed Converse, especially considering that like, 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. But there are also things that you can do with it. Like what they're doing now with Shay Gilgeous 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, like, that versatility just isn't there for the brand. And also it kind of is just a drag on Nike's overall sales numbers. Like it just isn't very good or productive right now.
- [26:26]
Sheena Butler Young
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. They'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?
- [26:46]
Mike Sykes
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, the moment that, 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, have made it clear that this is when they will big things for Converse. They 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, we'll get a, I think a better picture of how the, the World cup impacted Nike's financial outlook at that point. And that's going to come in in the fall in 2026, but I think that's technically there for 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 and 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 that by then things will, things will be a bit clear as far as this turnaround goes.
- [28:06]
Brian Baskin
All right, and we'll have you back then to talk all about it.
- [28:08]
Mike Sykes
Looking forward to it.
- [28:09]
Brian Baskin
Mike, thank you so much for joining us today.
- [28:11]
Mike Sykes
Thanks for having me. It's been a pleasure.
- [28:14]
Brian Baskin
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 yous wear@businessoffashion.com youm've
- [28:23]
Sheena Butler Young
been listening to the debrief, produced and added by Olivia Davies and Eric Bria. Hi, I'm Sheena Butler Young.
- [28:28]
Brian Baskin
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.
- [28:42]
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- [29:11]
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