Nike needs to focus on innovation to mount turnaround: Analyst

Shares of Nike (NKE) are slipping after the company reported earnings following yesterday's market close. The footwear and apparel company slashed its full-year guidance, expecting sales to drop 10% during its current quarter and warning of soft sales in China. S&P Global Ratings consumer products director Amanda O’Neill discusses the results in more detail.

O’Neill notes that Nike's revenue declines are surprising. She adds that the company encountered "many challenges," from a weaker macro picture to lost traction in digital strategy, forcing them "to shift and move more into the wholesale channel." From a credit perspective, the trend is concerning if it continues into 2026, O'Neill says.

To mount a turnaround, O'Neill believes Nike will need to focus on innovation and hone in on key consumer trends, such as athleisure and sport.

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This article was written by Gabriel Roy

Video Transcript

Shares of Nike slipping this morning as the athletic footwear and apparel company.

It reported earnings after the close yesterday slashing its full year guidance.

The company said that it expects sales to drop 10% during its current quarter and warned of soft sales in China amid a more challenging consumer for more on this.

We're joined by Amanda o'neill, who's the consumer products director at S and P global ratings here, Amanda.

Great to have you here speaking Nike with us this morning.

I mean, wanted to just get your read in on what we heard from the company and especially how they're navigating this consumer mindset and environment.

Thank you for having me.

Happy Friday.

Yeah, Nike, um it was surprising that Nike, you know, is expecting revenue declines next year.

The company, you know, was flat this year for revenue last year, they grew 10%.

So we saw a sequential decline throughout the year.

But um they noted many challenges, right?

So we know that the macro is weaker.

They've lost some traction in their digital strategy and have had to shift and pull back and move more into the wholesale channel and that's going to take time and that is going to um hurt their results for fiscal 25.

We know that from what we heard on the call that this looks like it's just going to be a fiscal 25 challenge and that they expect to have momentum from new innovations hitting the marketplace um to start growing in 26.

What would concern us at from a credit perspective is if this trend continues into 2026 and the company isn't able to remedy these revenue declines.

So, Amanda WW, when we talk about what Nike needs to do to turn that momentum around or regain their momentum, they blamed a lot of the slow down or misses here on weakness in their lifestyle brands.

I guess.

How much do you think that that argument has traction and then what do they need to do in order for their turnaround efforts to pick up some steam?

Right?

There's, there's a, you know, some thought in that because they were so focused on their, in growing their internal and their digital capabilities and growing on their own um direct to consumer digital business that maybe they missed on some innovations in running specifically.

Um and the consumer, you know, shopped elsewhere.

Um We've seen other brands really come into and gain popularity and take some share those being FCA and on running, for example, new balance has also gained traction.

So for Nike, what they really need to do is continue to focus on innovation.

They're going at it from a more balanced approach than digital focus and they're trying to meet the consumer where they want to shop and really hone in on some of the key trends in consumer, which can include, um, you know, comfort ath leisure, you know, and really focusing in on sport innovation, it, it costs, I mean, you gotta spend heavy into that and hope that it sticks with consumers as well.

Where do you think that division is that Nike can lean into where innovation will shine through and they'll be able to pass that through to the rest of the business.

Yeah, so Nike to it on the call that, you know, they have a vault right of products and a portfolio of um that they can continue to, you know, bring back and, you know, recreate them and um grow such as they did with, you know, re revamping if you will, such as what they did with Jordan, um pre panem.

Um So they believe that they have the products and the innovations ready.

They're also pulling forward a lot of innovations um that they had planned um to reset the the marketplace.

They are also investing a billion dollars in, you know, consumer facing um marketing and to really showcase these innovations um at the wholesalers and the retail channel to really drive that brand heat.

All right, we're tracking the swoosh here going into the start of today's trading activity.

Amanda o'neill, consumer products director at S and P Global Ratings.

Thanks so much for joining us ahead of the opening bell.

Thanks so much for having me again.