Ca$htag$: NKE Steps Down as Earnings Loom

0:00Welcome back to FastMarket on Schwab Network. I'm Sam Byrne. It's alongside Time Atom White. It's time now for cash tags for that. Let's bring in Landon Splon, co-founder of Lake Folio. So obviously we're discussing Nike ahead of these earnings later today to stock hitting an 8 year low yesterday. There's so much to stay here. I mean obviously Tom and I were speaking about this earlier in my show. The bar is low. You've got the margin story. You've got the China story. You've got the turnaround story. It's got its own issues to sort of iron out, not to mention now these sort of more exogenous type factors with the war in Iran, tariffs, etc. How are you thinking about this one into this report, Card Landon? Yeah, I mean if you look at Nike, they kind of had it all and they gave it away, frankly. And it's interesting when we talk about the shift from the wholesale distribution to direct to consumer, I think that was obviously the beginning of the downfall for them. As far as this downturn, I don't think the company's over by any means. But when that happened, I think a lot of people, myself included, thought, hey, this is going to be great for Nike.

1:03They're going to get so much more per sale so the margins are going to go up direct to consumer. They can go around footlock. They can go around Dix, all this stuff. But what happened was they gave up shelf space while their competition was getting far more competent. And that combination really, really hurt them. So now you've got a lot of people trying different shoes and different athletic wear. And you can see here the changes over time, just in the last year. And this is just looking at web visits. And it's incredible that there's one company that's negative here in the rest of them are positive. And some of them are very positive. And so Nike there at the bottom at negative two, whenever what else is doing well, really just kind of seals the story that that's what happened. They went direct to consumer. It sounded like a great idea. To them and to investors and analysts. But it turns out that wasn't the best play. And so they've been struggling ever since trying to sort of reset, trying to get growth back going in the right direction, get margins going. And they have been a little bit, I mean, if you look at

2:03last quarter, the revenue was up. Their wholesale revenue was up about 8% in the direct to consumers down about 8%. So they're shifting over as they need to. I think it's just going to take a little bit of time and they got to fight their way back onto the shelves, which is crazy to think about being Nike. I mean, they're one of the biggest, most recognizable brands in the world. So at this point, our data is fairly bearish on them. It matches the stock, though. I mean, I think every investor is fairly bearish as you can, you know, you talk about it 8-year-low. Of course, you got to be pretty bearish to get down to it 8-year-low yesterday. So we're bearish, but I think the market has been, has them priced fairly correctly at this point. And we do not see a big turnaround coming on this report tomorrow, Arthur Knight. Yeah, Landon, the bar is low. We've talked about this, but it's been low for the last two years, going into every earnings event, CEO Elliott Hill, trying to do this turnaround story. The win now strategy is not winning now at this point. But when you look at it, you mentioned it's still a

3:05top 10 consumer global brand, you know, but it seems like whether it's inventory issues, you know, contracting margins, directed consumer, not working out like it initially did. China sales slowing here. You know, with the bar this low, the RSI, you know, near the 30 lever over oversold, I know that some of your data is still negative at this point, but is this like maybe a kitchen sink type of quarter where they need to just say, hey, you know what, here's our results, here's our guidance. And we're kind of throwing the kitchen sink out where you could see maybe a pop because it seems like short interest is building up in this name also. Yeah, I think you could definitely see a relief rally. And for us, you know, what we would look for in this is you look at the holiday sales day and you look at the New Year's resolution data and that all happens at the same time, basically into the year, beginning of the year, which is all being reported right now basically. They gave some, you know, they gave some guidance on that one last year. They could see some of that, but but the actual data has has come in now and that's going to be reported. And when

4:07we look at our chart of their consumer demand over that period of time, we obviously we see a big spike in that time period, but what we don't see, and that's that bump to the right, compared to the one right before at the January of 2025 one, it's not as big. And so you would hope that over that year, the bleeding has stopped and maybe that they, you know, have, they can see a positive year over year on these very important to two factors. I mean, again, it's gift giving and it's New Year's resolutions. I'm getting in shape. I'm going to buy some clothes. I'm going to start running again, whatever it might be, you buy stuff or you're buying stuff for your friends and family back in in November and December. And that big bump is not what we would hope it would be for the turnaround story. Now it's, it's definitely decreasing at a slower rate, right? So the bleeding is slowing. Again, a negative 2%. That's not so bad, but we really would hope to see a positive number there to get a massive spike. So I think you might see a, hey, this company is starting to

5:09base out sort of messaging and maybe a little bit of a relief rally because it's just been sold so much. But what I don't think you're going to see is a, hey, we're back and we had a great holiday New Year's resolution season. Things are booming. I don't think you're going to see that at all, but that's not to say again, the stock could pop because once you're this sold, it's mostly cash on the sidelines or like you said, short interest, which you know, eventually they have to buy. And obviously we've seen a lot of retailers coming into 2026. So with some conservative guidance given a lack of visibility on the horizon, with particularly what is going on right now without mentioning the obvious, but I was totally to the folks I've been need him earlier today. They were talking about how sneakers were hot commodity in February, perhaps aided by like tax refunds, but athletic and outdoor sectors remain largely promotional, which then brings us back to that margin story as well. But that chart really caught my attention, Landon. I mean, of course, with Lulu at the top of that, what are these companies doing that you've seen that's

6:10getting that traffic that, you know, obviously they're doing right that Nike is not right now. From what we've seen, it's all about quality. People are raving about Lulu, about on cloud. It's the quality of the product. And Nike, I think for a long time, had the default number one position and they got into the form a little bit more than the function. And people started noticing when they, when runners started trying on cloud, for example, you know, we've got tons and tons of social media messaging where people are just blown away. They're throwing away. They're Nike's are saying, I'm all in on on cloud. That kind of stuff happened a lot over the last several years. And so it was, it was really a discovery of what else could be out there. And I think again, Nike opened that door by removing some of their shelf space, letting the competition come in and people trying out all these other brands. And I think Nike has slipped a little bit on quality in favor of form and branding, which they've always been very good at. And so yeah, that's

7:13the short answer. But yeah, you're right. I mean, we've got to watch margins. I think most of the margin problem came from tariffs. They, they did note that I don't know how well they're going to be able to get the margins back considering they're going to have to go back through third party sellers as opposed to direct to consumer. But all the data that we've got is fairly negative, not crazy negative, but it's just not that turnaround story yet. We do know, obviously, they're betting big on the World Cup in June. I think they're sponsoring six out of 10 top teams. And so that kind of that kind of exposure is is hopefully going to get them turned back in the right direction. And it may, but I just think that this very, very important quarter of holiday sales plus New Year's resolutions isn't the boot, the big gang buster sales event that we'd hoped it would be as as potential investors. But it is showing that, you know, sort of the bleeding is slowing and maybe we're basing out. Maybe we can start moving in the right direction. The good news is they've got the strategy right. They made their mistake. They figured it out. And they've got the strategy right now. It's just a question of how long it's going to take to

8:14execute and turn around this ship. Yeah. And then you always come down to obviously the health of those promotions as well. I mean, particularly when it comes to brand loyalty, are people just going to the brand because it's on sale. And you mentioned obviously the World Cup as well. I mean, it comes down to whether they can see some of that event durability and sustainability off the back of that as well. But Landon, thanks so much for your thoughts and a preview of Nike ahead of these earnings today.