Swoosh or Splat? Nike’s Make-or-Break Print Hits Tonight

Nike (NKE) heads into tonight’s print as a classic turnaround wager: the stock is down ~8–9% YTD and ~60% from its 2021 peak, sentiment has thawed from frigid to merely cool, and the new “Win Now” playbook under CEO Elliott Hill has investors scanning for the first unmistakable signs of stabilization. Street consensus pegs FQ1 revenue around $11.0B (≈–5% to –6% YoY) and EPS near $0.27, with many expecting a better tone on product and inventory but acknowledging lingering margin and China headwinds. Multiple upgrades in recent weeks (RBC to Outperform, Cowen to Buy) reflect growing confidence that Nike’s innovation pipeline (notably in performance running) and distribution resets can begin to repair the P&L—just not overnight.

• Gross margin trajectory: Management previously guided FQ1 GM –350 to –425 bps YoY (≈100 bps from new tariffs). Any downside surprise here trumps a small revenue beat; any upside (less discounting, cleaner mix) could re-rate the multiple.
• Inventory + channel health: Nike said the marketplace should be “clean” by 1H FY26; look for progress vs last quarter’s flat inventories and fewer factory/wholesale discounts.
• China stabilization: Last quarter Greater China revenue fell ~20–21%; even a modest sequential improvement would ease the bear case on share loss.
• Topline cadence & guide: Street wants Q2 to be “less bad” (LSD–MSD down) and a path to 2H inflection; tone on order books into holiday and Spring ’26 matters.
• Opex control: Several bulls expect the beat (if any) to ride lower SG&A as much as sales.
• Product heat: Running (e.g., Vomero), basketball revival, and the SKIMS launch are the consumer tells; full-price sell-through > limited hype drops.

Consensus: Revenue ≈ $11.0B; EPS ≈ $0.27. Management had flagged FQ1 revenue down mid-single digits and gross margin down 350–425 bps, with tariffs contributing ~100 bps. For FY26, Nike expects SG&A up low-single digits and tariff headwinds to weigh more in 1H than 2H as mitigation (pricing, sourcing, cost) phases in. Several houses frame tonight as a modest “beat/guide-less-bad” setup: Citi looks for an EPS beat on stronger sales + lower SG&A, BofA expects sequential sales improvement in Q2 and a 2H stabilization narrative, and Jefferies argues the Street is underestimating the recovery arc (PTs skewing $74–$115).

The June quarter (reported in late summer) was the capitulation print: revenue –12%, gross margin ~40% (–440 bps) on heavy wholesale and factory-store discounting, and China –20%. Management’s response was structural: a flatter leadership model (“sport offense”), sharper sport-led product flow (running, training, basketball), and a pledge to reclaim full-price positioning as inventories normalize. The message then: near-term margins would stay pressured as cleanup continues, but holiday order books were up and the path to healthier mix was visible.

Short answer: it’s possible to see the turn tonight, but proving it still takes 2–3 quarters. What would constitute credible evidence?

Gross margin bottoming now, not later. If GM decline lands toward the better end of the –350 to –425 bps range—and management nudges 2H margin expectations higher via mix/full-price—investors will credit the cleanup.

Inventory normalization with fewer promotions. A clear step-down in aged inventory and tighter allocation to wholesale (fewer off-price levers) is the fastest route to restoring brand heat and gross margin.

China less negative. Even “less bad” (e.g., HSD–MSD down) paired with green shoots in performance categories would ease the “share-lost-for-good” fear.

Product proof points beyond one franchise. Running momentum (Vomero, new racing/training styles) needs companions in basketball and sportswear to rebuild scale; watch attach on SKIMS as a women’s re-engagement signal, but don’t expect it to move the model yet.

Expense discipline while investing in innovation. The turnaround can’t rely solely on price/mix; SG&A control plus targeted R&D and storytelling around sport (World Cup, marquee events) is the balance to strike.

Tariff mitigation roadmap. Management sized ~$1B of gross incremental tariff costs; investors need milestones (sourcing, pricing, vendor terms) that make this a 1H FY26 nuisance, not a full-year anchor.

The Street sees two offsets at work: (a) Sales headwinds from de-emphasizing legacy hoops classics and a still-competitive lifestyle backdrop (Stifel’s checks show New Balance and adidas taking share in retro/terrace styles), and (b) margin tailwinds from cleaner inventory and a pivot back to performance innovation. Bulls argue the market is paying roughly ~28x forward P/E for trough earnings—close to Nike’s 10-year average multiple—for a franchise that can recapture 45% gross margin / low-teens EBIT over a multi-year horizon. Skeptics counter that visibility to MSD+ revenue growth and China recovery is still limited, making an elongated rebuild plausible.

If Nike delivers a small beat with: (i) GM better than feared, (ii) explicit confirmation that Q2 is sequentially better (LSD–MSD sales decline improving), and (iii) cleaner channel/inventory commentary, the stock can work on relief—even if top-line remains negative. If, instead, margins miss and China/wholesale look wobbly, the multiple likely compresses while investors wait for Spring ’26 order books to bail them out.

Turnarounds start in the margins before they show up in the growth line. For Nike, that means fewer discounts, tighter wholesale, and product that earns full price—with tariffs contained and China stabilizing. Tonight’s print won’t complete the job, but it can prove the slope. If management pairs a “less-bad” guide with concrete progress on inventory and gross margin, the market may finally believe that the swoosh is bending in the right direction.