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Happy Saturday, Crew!

I’ve got a pretty interesting update for you all heading into next year. I’m going to significantly step up the value of this newsletter. Also, quick apology. The last few weeks have not been up to the standard some of you expect, and that’s on me. That won’t be happening next year.

But for now, I want to quickly dive into one of your favorite brands, or at least a brand that used to be.

Nike’s fiscal Q2 headline looked “fine” on paper, but the market is not rewarding optics right now. What matters is the pace of change, and it’s still not moving fast enough. It’s been over a year into this reset, and the outlook tells you the turnaround is taking longer than people hoped.

Nike beat estimates on EPS and revenue, but profitability and guidance were the real issues. Gross margin this Q was down about 300 bps, with pressure tied to tariffs and ongoing promotions to move product. That’s not a one-quarter problem. It’s the type of pressure that lingers until the inventory and channel mix are truly cleaned up. For instance here’s what they are guiding: Revenue seen down low single digits YoY vs expectations for modest growth. Gross margin seen down 175–225 bps vs expectations for expansion.

China is still messy, and it’s more than just macro

Greater China sales were down 17% in the quarter, and management basically admitted they need to “reset” their approach. Part of this is still excess inventory and promotions, which can turn into a loop: discounting helps move units, but it can also make the brand feel less premium, especially in a market where perception matters.

The deeper issue is cultural relevance. China’s Gen Z is leaning into homegrown brands and “Guochao” identity, and local players like Anta and Li-Ning have been sharper with culturally native campaigns, product stories, and digital-first engagement. Nike’s classic global playbook can come off as polished and controlled instead of personal and community-driven, which is not what that consumer wants right now.

Nike also looks behind on how China shoppers discover brands today. WeChat, Douyin, Tmall, livestreaming, creator collabs, interactive drops. Local competitors live in that ecosystem. If you are not winning there, you end up leaning on more traditional levers that just do not hit the same.

Converse is the second problem nobody can ignore

Converse sales were down around 30%, and it does not feel like a quick fix. When product is not resonating, the reset usually takes time: assortment changes, design direction, marketing shifts, and then you still have to wait for consumers to care again. In the meantime, it’s a real drag on the narrative.

Low visibility is killing confidence

Nike once again avoided full-year guidance, and that matters. Investors hate low visibility, especially during a turnaround. On top of that, the Q3 outlook implied a low single-digit revenue decline. That’s the opposite of what the market wanted to hear if the story is “inflection soon.”

So even if parts of the business are improving, the setup becomes harder to own because you cannot underwrite the timeline.

What actually looks better

Not everything was bad. North America was stronger, and running continues to be the clean bright spot. Nike is clearly pushing back toward performance and sport, and that’s the right direction. But right now, the market is basically saying: “Show me this at scale, and show me China stabilizing.”

What to watch into 2026

• Signs China can stabilize without heavy promotions

• Store fleet and assortment refreshes rolling out fast, not just pilots

• Digital engagement that feels native to China, not translated

• Converse product newness that actually sells through

• Any shift toward more guidance or clearer longer-term targets

Net-net: the reaction is fair. The issue isn’t whether Nike can recover. It’s the pace, plus the two biggest drags (China and Converse), and a guidance stance that keeps investors guessing.