NKE F1Q26 - "journey back to greatness has just begun", says CEO. Bull case to $115.

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September 30, 2025

Nike Investment Report - Q1 FY2026 Turnaround Execution

NIKE (NKE)

👟🏀 Global Athletic Footwear Leader | "Win Now" Strategy in Progress

Q1 FY2026 Results | $11.7B Q1 Revenue, +1% YoY Beat, Elliott Hill Turnaround Gains Traction

💰 Market Cap: $102.4B | 🏢 Employees: 77,800+ | 🌍 Global Leader
👨‍💼 CEO Elliott Hill | 🚀 Win Now Strategy | 🎯 Innovation Focus
$72.15
📈 +$2.42 (+3.47%) After Hours
Current Price
Price Target Scenarios

18-Month Horizon (2026 Targets)

$115.00
Bull Case (+59%)
Turnaround Success
Innovation Comeback
📊 Valuation Calculation:
• 2026E EPS: $3.50 × P/E: 32.9x = $115.00
🚀 Key Assumptions:
Win Now strategy drives rapid innovation • Wholesale partnerships fully restored • Running & basketball market share gains • China recovery accelerates • Inventory cleanup ahead of schedule • Margins expand to 44%+ • NikeSKIMS and new products gain traction
$82.00
Base Case (+14%)
Steady Progress
Gradual Recovery
📊 Valuation Calculation:
• 2026E EPS: $2.65 × P/E: 31.0x = $82.00
⚖️ Key Assumptions:
Turnaround takes full 18 months • Revenue growth returns to mid-single digits by FY27 • Wholesale grows steadily • China stabilizes but slow recovery • Tariff impact managed effectively • Margins recover to 42-43% • New product launches meet expectations
$50.00
Bear Case (-31%)
Turnaround Stalls
Competition Intensifies
📊 Valuation Calculation:
• 2026E EPS: $2.00 × P/E: 25.0x = $50.00
🔻 Key Assumptions:
Win Now strategy fails to deliver • Innovation pipeline disappoints • Competition from On, Hoka, New Balance • China market share losses deepen • Tariff impact worse than expected • Consumer recession • Digital channel continues declining • Wholesale partners lose confidence
Bottom Line for Retail Investors
👑
Brand Dominance
World's #1 athletic brand, iconic swoosh recognized globally, Jordan brand cultural phenomenon, 50+ years of innovation, celebrity athlete endorsements
🎯
Turnaround Progress
Elliott Hill returned as CEO October 2024, Win Now strategy restoring focus on sport, wholesale partnerships rebuilding, early wins in running category
📈
Upside Catalysts
Q1 revenue beat expectations with +1% growth, wholesale up 7%, North America +4%, new product innovation pipeline, inventory cleanup progressing, NikeSKIMS partnership
⚠️
Risk Factors
Tariff headwinds increased to $1.5B annually (120bps margin hit FY26), Greater China -10% with structural challenges requiring time, Nike Digital organic traffic down double digits through FY26, classic franchises down 30% North America, Converse reset underway, profits down 31%

📊 Q1 FY2026 "Early Momentum in Win Now Turnaround" Performance

$11.7B Q1 Revenue +1% vs -5% Expected, EPS $0.49 Beat $0.27 Est, Running +20%, North America +4%, Wholesale Order Book Up, 8,000 Employees Realigned to Sport Offense

💵
$11.7B
Q1 FY2026 Revenue
+1% Reported, -1% FX-Neutral
📊
$0.49
Q1 Diluted EPS
Beat $0.27 Est, -31% YoY
📈
42.2%
Q1 Gross Margin
-320 bps YoY
🏢
+5%
Wholesale Revenue Growth
NA +11%, EMEA +4%, APLA +6%

📞 Key Q1 FY2026 Earnings Highlights

🎯
Sport Offense Activated
Realigned 8,000 employees in Q1 to sport-based organization (vs demographics), organizing by brand/sport/country/channel for sharper consumer insights, House of Innovation NYC redesigned by sport seeing double-digit revenue gains
🏃
Running Business Breakthrough
Nike running grew over 20% in Q1 becoming proof point, three-silo structure (cushioning/stability/everyday) with consistent price points enabling major innovation each season, Vomero 18 doubling distribution, Romero 18 strong in China
🤝
Wholesale Momentum Building
Wholesale +5% globally, North America +11% (some timing benefit), spring order book up YoY led by sport categories, reset 1,300 running spaces at Dick's/Nordstrom/specialty, Nike brand store launched on Amazon exceeding expectations
⚠️
Critical Headwinds Persist
Greater China -10% with traffic/sell-through challenges, Nike Digital -12% (organic traffic down double digits), tariff impact increased to $1.5B annually (was $1B), 120bps gross margin headwind in FY26 (was 75bps)

📍 CEO Commentary: "Nike's journey back to greatness has only just begun. There is significant work ahead, especially in the areas of sportswear, Greater China and Nike Direct. Progress won't be perfectly linear, but the direction is clear" - Elliott Hill. Hill emphasized organizing by sport gives "much clearer point of view" with runners wanting three things: big cushioning, stability, or everyday energy return

🎯 Sport Offense Structure: Realigned 8,000 teammates in Q1 to organize three brands (Nike, Jordan, Converse) into nimble teams by sport rather than demographics, creating sharper consumer insights and distinct brand identities, "only just begun" with each sport at different development stage, long-term vision extends beyond traditional sports to Nike ACG outdoor and new partnerships

🚀 Marketplace Elevation Progress: House of Innovation NYC redesigned by sport seeing double-digit revenue increases, South Congress Austin store refocused on running/training with significant sales lift, reset 1,300 running spaces from Dick's to Nordstrom to specialty, Nike brand store on Amazon driving stronger engagement than anticipated, 12 sport takeover moments activated in 10 months

🔮 FY26 Outlook & Guidance: Q2 revenue expected down low single digits with 1pt FX benefit, Q2 gross margin down 300-375bps including 175bps tariff hit, wholesale expected modest growth for FY26 with spring order book up, Nike Direct not expected to return to growth in FY26, SG&A up high single digits in Q2 with demand creation acceleration, North America leading global recovery

🚀 Why NKE Bulls Are Right
🏃
Running Leading the Comeback
Nike running grew over 20% in Q1, strong across North America (double-digit), EMEA (double-digit), and Greater China (high single-digit), three-silo product structure with consistent pricing enabling major innovation each season, Vomero/Romero showing strong consumer response
🤝
Wholesale Partners Gaining Trust
Spring order book up YoY led by performance categories, wholesale returned to growth globally (+5%) and North America (+11%), partner inventory healthy creating capacity for newness, 1,300 running spaces reset showing early promise, Amazon store exceeding expectations
🎯
North America Proving Ground
North America +4% revenue leading global recovery, furthest ahead on marketplace elevation and Win Now execution, running/training/basketball all double-digit growth, units down but dollars flat showing pricing power, closeout mix approaching normalized levels
⚽
Innovation Pipeline Expanding
Global football preparing for 2026 World Cup with new apparel innovation platform, Phantom 6 relaunched with great sell-through, new Tempo Q3 and Mercurial Q4 launching, Nike ACG with Radical Air breathable platform and Ultra Fly trail super shoe, NikeSKIMS launched with 58 silhouettes
🐻 Why NKE Bears Have Valid Concerns
📉
Classic Franchises Struggling
North America classic footwear down 30% as Air Force 1 stabilizing, Air Jordan 1 inventory normalizing, Dunk managed aggressively down across all geos, Converse Chuck Taylor in early stages of global reset under new leadership, sportswear business continues declining
🌐
Digital Channel Under Pressure
Nike Digital down 12%, organic traffic declining double digits expected through FY26, repositioning to full-price hurting traffic, Q2 faces bigger headwind lapping holiday promotional cuts, paid media pulled back, China Digital down 27% in highly promotional marketplace
🇨🇳
Greater China Structural Issues
Revenue -10%, EBIT -25%, seasonal sell-through underperforming requiring larger investments to clean marketplace, 5,000+ mono-brand stores need sport-based refresh requiring investment and time, traffic declining in Nike/partner stores, structurally different marketplace dynamics vs other regions
💸
Escalating Tariff Impact
Tariff cost increased from $1B to $1.5B annually due to new reciprocal rates, FY26 gross margin impact raised from 75bps to 120bps, China represents 16% of US footwear imports (reducing to high single digits by end FY26), mitigation taking time to implement

This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial advisor before making investment decisions.