Nike’s first-quarter revenue fell 4.3 per cent to US$11.21 billion, missing analysts’ expectations. Shares slumped as much as nine per cent in premarket trading Friday after full-year revenue guidance also disappointed.
BNN Bloomberg spoke with Zachary Warring, equity research analyst at CFRA, about Nike’s turnaround challenges and why he sees potential value in the shares despite the disappointing results.
Key Takeaways
- Warring sees weak consumer demand, excess inventory and lost market share as challenges for Nike’s recovery in China.
- Jordan’s struggles largely reflect excess inventory and demand pulled forward during the pandemic, rather than fading brand appeal, he said.
- Running sales have posted double-digit growth for six consecutive quarters, offering a bright spot alongside North American growth.
- Sportswear, which Warring said accounts for almost half of revenue, needs to stabilize before Nike can achieve a broader turnaround.
- Warring supports Nike’s efforts to streamline operations but believes its US$2.5-billion savings target could be more ambitious.
Read the full transcript below:
ROGER: Well, Nike reported its first-quarter results, which missed expectations, showing weakness in Greater China, Jordan Brand and sportswear. Joining us now is Zachary Warring, equity research analyst from CFRA. Zachary, thanks very much for joining us.
ZACHARY: Yeah, thanks for having me.
ROGER: Overall, probably not the best report we’ve seen. What was the biggest concern to you from it?
ZACHARY: Yeah, not a good report at all. I think the biggest concern is that he’s, you know, the new CEO, Elliott Hill, has been there for two years now. This is a report you would have expected in, you know, the third or fourth quarter in, not two years in, and it was a very underwhelming quarter. The full-year guidance was well below our expectations and consensus in terms of revenue and earnings, and I still — I just think the China issue is much bigger, and they talked about that in, in the call, how they expect it to get worse in China before it gets better. So overall, not a great quarter, but we, we think now that there’s been some washout in expectations, valuations on a revenue basis look really appealing. Earnings, we think, if you look out a year or two, valuation there is also appealing. So I think there’s some bright spots here.
ROGER: Okay, let’s talk about the not-so-bright spots first, though. What are the big issues in China, do you think?
ZACHARY: Yeah, I mean, I think China’s macro picture is weaker than many think. You saw that in the Lululemon report. You know, they were growing 40, 50 per cent, you know, year over year in a lot of quarters in the last two years, and then this last quarter or two has been very weak for them. So I don’t think that’s just a Nike issue. We think that’s a China consumer, and then also the brand has some inventory issues there as well. We do think that can return to growth. I think they’re doing a lot of the right things there. They’re making shoes that are — they’re marketing them as made in China, you know, made locally there, designed locally there. So I think they’re doing a lot of the right things there. It’s just the macro picture is a little weak, and I think that they had lost the market share there.
ROGER: All right, and sportswear and Jordan Brand are still struggling as well. Is that — I mean, is Jordan becoming passé?
ZACHARY: No, I think a lot of the Jordan issues were inventory issues. I think they, you know, stuffed the pipelines and overstuffed the pipelines a couple of years ago. Really, this decline has started from coming out of the COVID pandemic. You know, footwear companies did extremely well as people were staying home and there wasn’t much to buy other than things to, you know, get out and be healthier. And you had a lot of pull-forward demand there, so, you know, we kind of knew that the demand wouldn’t stay that high for apparel and footwear, durable goods in general. And I think it just started there and slowly, slowly declined. And then, you know, the last 18 months have seen a significant decline. So I think, you know, the Jordan Brand will be okay. I think once they get through their inventory issues there, you’re starting to see stabilization in Air Force 1. Dunk was obviously a big writedown this quarter, so underperformance of some of the legacy brands. We think that’ll stabilize this fiscal year, and moving forward should be a little bit easier in terms of comps.
ROGER: Okay, so from the positive side, performance sports — is some momentum there in North America? Recovery is on track.
ZACHARY: Yeah, North America was impressive. You know, two per cent growth for a company that’s already been in the U.S. for over two decades. You know, that’s pretty impressive. Saturated market. So that was great on the report. Yeah, performance brands — running’s been strong, so double-digit growth now for six consecutive quarters. So running has not been an issue, which I think a lot of people, when Hoka and On entered the market, thought they would lose some running market share. They’re actually gaining running market share with double-digit growth there. A lot of bright spots. Mind — obviously, they released that in the spring, and that, that sold out almost immediately. You know, they’ve got the Caitlin Clark shoe that just came out yesterday. They say that almost was sold out within two hours. So a lot of good things through the pipelines. We think that’ll continue and spread to, to more categories moving forward. Obviously, the issue is sportswear. You know, making up almost 50 per cent of revenues, they’re struggling there, and that’s, that’s got to stabilize before you can really see an inflection point and things start to turn around and grow.
ROGER: All right, and their restructuring plan — $2.5 billion over the next five years — realistic?
ZACHARY: I think so. I honestly thought it was a little underambitious, so I thought they could be a little bit more ambitious with operating. We like that they’re now focusing on that. We think just focusing on operating and stabilizing their legacy brands, they could return to almost $3 a share because they’re doing so well in some of these other categories. But yeah, I think that’s — we think that’s the right move to focus on the operating efficiencies. Move, you know, some productions into India and just maybe lower. I think they’re switching to three categories now instead of, you know, the four or five that they had in terms of geography. So they’re trying to streamline things. We like that. That’s obviously a very beneficial thing for margin over the long term. So we think they could have been a little more ambitious than $2.5 billion over, you know, the next three to four years.
ROGER: Okay, and what are you going to be keeping an eye out for over the next six months to a year with Nike?
ZACHARY: Yeah, I think it’s going to be the stabilization of the sportswear. You know, Jordan is very important, and Dunk obviously needs to stabilize after this quarter, and so I think that’s what you’re really focused on because if you do see a stabilization there, I think that’s where you’ll see the inflection in margins, and I think you’ll see revenues start to turn higher, you know, year over year.
ROGER: And for what would be a headwind that might catch your eye?
ZACHARY: Obviously, the oil issues. This is a global apparel company. They ship a lot of things all over the globe. So, you know, elevated oil for another six months could obviously impact margins, but they have much bigger issues that they’re trying to work through in terms of product. So I think sportswear is where, you know, you’ll start to see the inflection.
ROGER: Okay, we have to wrap it up there, Zachary. But thanks very much for joining us.
ZACHARY: Yeah, thank you.
ROGER: Zachary Warring, equity research analyst at CFRA.
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This BNN Bloomberg summary and transcript of the Oct. 2, 2026 interview with Zachary Warring are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
