l said he wants the company to start “obsessing with sport and get back to winning”, a grim admission that right now the company is losing. Nike’s results for the latest quarter, reported just before Christmas, were a further illustration, if any was needed, of just why Nike needs a change of direction. Global revenues are down, inventories are still bulging and promotional activity is rife rather than planned for specific occasions, which is eroding Nike’s reputation as a premium brand. Hill has also been at pains to commit to better supporting Nike’s wholesale customers, many of whom Hill confesses “feel we turned our back on them”. He promises to provide them access to more complete product ranges and collaborate with them more closely to get sell-through. Hill is under no illusions about the extent of the mess he has to iron out, and given his close ties with the company culture during three decades of service, he may well be the ideal person for the job. Nike’s messy income statement Nike’s overall global revenues fell by 8 per cent, to $12.4 billion, in its second fiscal quarter ending November 30. Gross margin fell by a full percentage point. Selling and administrative expenses fell, too, but not as fast as revenues, and net income dove by 26 per cent, to $1.2 billion. For the first six months of Nike’s fiscal 2025 (from the beginning of May until the end of November), the picture is roughly the same: Revenues are down 9 per cent and net income by 27 per cent. Weakness is evident in all the company’s geographic regions: Revenues for the quarter fell by 8 per cent in North America, 7 per cent in Europe, Middle East and Africa, 8 per cent in Greater China, and 3 per cent in the Apac region and Latin America. In China, where Nike is in a battle with both domestic and international brands, the wholesale channel was especially problematic, down 15 per cent. Earnings before interest and taxes (EBIT) for Greater China took a dive by 27 per cent. Hill hits the road Hill has spent the time since his return globe-trotting with the Nike leadership team, talking with retailers, suppliers, sports organisations and employees, trying to get his head around where things went wrong and how the ship could be righted. He concluded, as he told investors on December 19: “We lost our obsession with sport.” The company needed once again to put sport front and centre, fill out its product assortment, and invest in creating consumer demand by making the company’s famous bold marketing statements. Nike had placed too much emphasis on capturing demand through its digital channel.  A renewed focus on sport Nike’s association with top sporting events is a key part of its marketing edge. China, a key growth market, has been particularly problematic though, and the company will be particularly keen to get momentum back. To this end, it sponsored the Shanghai Marathon with nearly 40,000 runners, on December 1. The event was so popular that it received a quarter of a million registrants. The company also hosted elite Kenyan marathoner Eliud Kipchoge on a series of community outings, including school visits, and a run along the Great Wall. Hill’s endeavors to get momentum in China again may be complicated by the country’s nettlesome relationship with the US, which could be aggravated further with the advent of the incoming Trump administration. While discussion of the effects of potential US tariffs on retail goods exported from China have focused almost exclusively on inflationary and supply-chain impacts for US importers, there has been little attention given to the psychological effects of protectionism on the Chinese consumer; specifically, the tendency of domestic consumers in China to ‘buy local’ and the potential for retaliation against the US. In China in recent years, domestic brands have been making increasing dents in Nike’s market share, and indeed the market share of other global brands. Li Ning and Anta are examples of local sportswear labels that have been gaining favour with the Chinese. Nike’s CFO Matt Friend admitted early in 2024 that Nike was at the wrong end of “meaningful shifts in consumer traffic in key markets – particularly in Greater China”. The traffic and sales softness had a lot to do with economic nationalism, that is the shift in consumer preferences towards domestic brands. The outlook: it’ll get worse before it gets better Friend provided the short-term outlook and it was an ‘it will get worse before it gets better’ story: The company expects revenues in the quarter through the end of February to be down more than 10 per cent, as Nike clears excess inventory and the top line is buffeted by foreign exchange movements that will reduce dollar-denominated sales. Gross margins will be down a whopping 300-350 basis points. Clearly, Nike is looking to get through the reset process quickly so it can get back to what has made it successful: investment in product, premium brand image and pricing, and limited promotional activity. It wants to get back on its perch as the most desirable sports footwear and apparel brand on the planet. The new CEO knows that time is precious and he can’t afford to dawdle. Investors are sceptical and although analysts on Nike’s investor call on December 19 were congratulatory towards EHill, the mood was angsty and sceptical: by Friday, December 27, the company’s stock price was down nearly 30 per cent from what it was at the beginning of the year. Further reading: Can Nike’s new CEO help the company regain its momentum?