“Nike is a brand of China for China,” said Nike CFO Matt Friend.

That is the mindset that has taken hold.

An American company built on American consumers and American ambition starts talking as if its real home is a market that has been soft for years. China consumer sentiment has been battered since COVID. Sales there keep falling.

Domestic brands keep taking ground. Yet the people running Nike keep circling back to deep localisation and treating China like its their saviour.

The United States is still the largest consumer market on earth. Nike still makes most of its money there.

The brand still carries an American origin story. Leading with China when that market is weak shows how far the leadership has drifted from the people who actually built the company.

The Numbers

The most recent reported numbers only underline it. In the quarter ended 31st May revenue hit $10.97 billion, down 1 percent on a reported basis and 4 percent without currency exchange considered.

Greater China dropped 12 percent reported and 17 percent currency neutral. Full year revenue for the year to May finished at $46.4 billion, flat on the surface and down 2 percent underneath. Inventory stayed at 7.5 billion.

The share price is DOGSHIT.

Market value sits near 62 billion.

Guidance still points to more declines in the low to mid single digits through the first half of the new fiscal year.

On the call the language stayed careful. Progress is uneven. Foundations are being rebuilt. The medicine is working. The results just are not there yet.

People managing a slow slide instead of facing the real problem.

What Nike Used to Be

Twenty years ago Nike stood for being elite.

It was the brand of the kid who stayed out late practising, the player who refused the limit other people put on him. The faces were Tiger Woods, Wayne Rooney, Cristiano Ronaldo.

The message was simple…

You can become something more if you are willing to suffer for it. That hunger built everything. The shoes and shirts were just the delivery system.

Somewhere that voice got purposely lost.

Marketing and product stretched into broad inclusion and lifestyle acceptance. The brand that once told you to be the best started telling you it was enough just to be yourself.

Nobody actually wants that.

People want to be accepted for being the best, or at least for aspiring to be the best. That drive is what made Nike matter.

Swap it for the corporate fashion of the moment and the brand turns forgettable and bland.

The People Problem

The people problem sits under all of it.

Nike let in too many non sports, non competitive staff, especially in marketing, brand and human resources. The culture shifted from performance and risk to process and inclusion.

Management consultant types filled the board and the top jobs.

They read white papers and spreadsheets and the latest corporate trends instead of watching what actually moves people.

Pricing turned into a crutch. Pushing Air Force 1s up to £120 or £150 quid was habit and nostalgia covering the fact that the brand no longer generated anything new on its own.

When the voice dies all you have left is the markup.

Adidas Got It Right

Adidas showed the other way. It got alternative and retro sports fashion right at a proper premium.

It moved early on padel for example while Nike was still looking the other way. Nike became the brand of the Tech Fleece tracksuit. Not exactly the stuff of ambition.

China is just the most visible version of the same out of touch instinct.

Talking louder about localisation in a soft market will not fix a brand that has lost its edge.

The core consumer still lives in America and still responds to the same thing that always worked.

The promise that greatness is possible if you chase it hard enough.

What Has to Happen

So here is the playbook to fix the company.

Headcount needs to be cut hard. The company is carrying too many people who do not generate elite energy.

The seats and the money go instead to risk takers. People who have played sport at a high level and still play. People who understand competition in their bones.

People who can take a hit from the average and keep going.

Poker players are not a bad secondary test.

They know what downside feels like.

Marketing has to be rebuilt around the same standard. The inclusion first culture ends.

Or at least, include the people who have fire and vision.

There is no soft landing. You kill the rot or it keeps spreading.

Sponsorship needs the same treatment. The individual athlete deal is a worse and worse trade.

Social media gave athletes their own audiences. Plenty of them can already run their own commercial lives. Paying big money for personal endorsements buys less control and more noise.

Shift the weight to places.

Sponsor the stadiums, the high end hotel gyms, the performance gyms, the clubs where the serious people actually train.

Presence in the locations that matter beats another short term face on a billboard.

Produce documentaries, run the Red Bull model of marketing. Just stop being fucking boring and corporate sloppy.

Places and Elite athletes first. Nike as a media brand to encompass this.

Lifestyle soft names last and in most cases not at all. No more ambassadors.

The athlete roster gets the same filter. Grand Slam winners. Major winners in golf. Premier League or World Cup winners. The specific athletes that little boys still dream of becoming.

Ambition and future desire over corporate fashion. Soft lifestyle names leave.

Product follows the same logic.

The over extended lifestyle and inclusion lines that have no real performance core get cut back or killed.

Money moves to the categories that still carry elite vision and to the emerging high spend sports Nike has been late on. Padel is the obvious one right now. The money is there. The moment is there. Nike showed up late. That pattern stops.

Pricing discipline comes back. Using heritage product to pull higher prices while the brand voice is weak is extraction of a dedicated consumer base and I don’t care about the inflation excuse post Covid. Full price realisation has to be earned again through real desire.

China gets operational discipline and not more narrative. Clean the inventory. Tighten the channels. Make the product desirable again. Stop treating a soft market as the main stage while the American consumer base watches the brand lose its edge.

No Gradualism

None of this is gradual. The board and the leadership class that put this culture in place and defended it have already failed. The failure is structural and worse, intended so the next chief executive inherits a clear choice.

If you come from a pure management background you are already the wrong person. If you do not dare to dream you are doomed. If you do not think about the little boy who dreamed of becoming Cristiano Ronaldo or David Beckham you are fucking doomed at Nike 2.0.

The job is not to manage the current culture into slightly better numbers.

The job is to kill the rot completely. Cut the company free from the culture and brand of the last several years. Bring back the elite voice. Hire and promote only the people who still understand competition.

Move faster on cultural moments than the consultants who ran the place before. Stop using secondary markets in structural weakness as the new frontier while the core erodes.

Nike is not a necessity like an iPhone. Apparel and footwear are still a choice. Choices run on desire. Desire runs on aspiration. Aspiration was the original product.

Bring it back or watch the brand keep shrinking. There is no third option.

How might we play Nike

Look, the valuation currently isn’t unattractive.

But the factorisation of the stock is muddy.

What is interesting is I think Nike do now want to turnaround the company.

Fox released this yesterday.

A day after I dropped this week’s Big read article on X.

What we are looking at right now is a pure, pure story play.

Elliott Hill is the CEO who started off as an intern in the 80s.

He knows the story and knows the legacy of Nike.

What we need to start seeing is this sport first, elite labour culture change.

What’s interesting from the above interview with Fox is he mentioned telling stories, just like how I’d mentioned pushing media forward…

As well as massively focusing on sport. Not lifestyle.

There is no trade I can provide to you yet, outside of saying to you that if they are able to change the culture of Nike, the share price will absolutely respond.

Hearing a lot about the memory shortage theme being done because peak margins have been reached.

All because Sandisk reported 84.6% gross margins, then lowered their margin guidance to an anaemic 83-85%.

How will they survive on that?

Clearly the picture has changed now. The easy money phase is behind us.

Full price discovery mode was engaged as the market decided it had no idea what these companies should be worth in this era, but everyone agreed the only correct answer was “higher”.

Momentum took over, then momentum was Leopolded.

Now that the market has much better visibility on the revenue trends, it’s unlikely that these stocks will trend as violently as they did on the original run up.

Focus has shifted from growth to valuation & sustainability.

Which makes the theme far less attractive from a surprise premium perspective.

Hyperscalers Be Scaling

We highlighted this behaviour change last week. The collective lightbulb moment.

Suddenly the hyperscalers weren’t out of their minds at all, and were going to make bundles of cash from their compute investments.

Amazon’s taking a well earned break after soaring 20% in two days post earnings.

And the rest are playing catch up…

The Lights

🟢 AI – STILL the only real multi-year theme left standing. Structural, broad, and the one we’re prepared to lean into through the noise. Semiconductors are out of favour after the unwind. So we’re noting where AI is driving change outside of “more compute”. Like our stock of the week below…

🟡 Metals – Gold & silver miners have been major beneficiaries of the weaker dollar. The 1 week performance has been exceptional. And the weak jobs report today (Friday) supports that idea. Early days for this group, but worth watching.

🔴 Shit Software – Have been wrestling with how to define software into sub-segments rather than talking about it as a group.

So we’re going with useful software & shit software.

Infrastructure, cybersecurity, observability/data platforms, and related SaaS areas are starting to perform. Useful stuff.

Duolingo, The Trade Desk, AppLovin, HubSpot? Not so much…

If you’re a software name and not in the useful group, you’d better be killing it on the execution and blowing your competitors away…

They’re the global leader in multi-channel e-commerce infrastructure and merchant software. 

The company powers everything from small online boutiques to enterprise brands, operating primarily through two core monetisation streams:

Merchant Solutions (taking a cut of total payment and transaction volume) and Subscription Solutions (recurring software plans and enterprise subscriptions).

Why now?

One word: GROWTH

Management is heavily focused on deepening platform stickiness through an AI-native merchant operating system that automates daily business tasks, driving higher customer retention and long-term Gross Merchandise Volume (GMV).

But there’s no moat?

Very few companies have true moats. Dig a little deeper, and it’s all network effects & switching costs.

Far more important is if the business keeps growing and delivering.

Shopify’s strategy stands out because it mirrors how category-defining SaaS ecosystems build unbreakable network effects. 

By embedding autonomous workflows, marketing copy tools, and financial tools directly into the merchant dashboard, Shopify creates immense switching costs. 

Once a business builds its catalogue, payments infrastructure, fulfillment channels, and AI automation onto Shopify, leaving the platform introduces massive operational friction. 

A client base that is deeply integrated into the platform translates directly into durable, high-margin software revenues and predictable transaction fees.

Shopify's top-line acceleration (34% growth at a $14B+ annual run rate) paired with expanding free cash flow margins (18%) demonstrates that AI feature adoption is directly translating into higher platform attachment rates, larger gross merchandise volumes, and accelerated merchant sign-ups.

Thematic Exposure

Shopify offers direct exposure to the Autonomous Commerce & Agentic AI mega-trend.

The company is transforming into an automated back-office for digital commerce. As small businesses and enterprise merchants look to reduce labour overheads and operate leaner, Shopify’s software stack serves as the operational layer servicing this demand.

And does anyone believe that commerce will be LESS online in an increasingly AI driven world?

How Shopify supplies the AI-Commerce Stack:

The focus is on seeing Shopify complete its transition from a pure retail software provider to a mission-critical Enterprise AI Software OS.

Shopify historically traded with higher growth volatility. The goal now is to see it maintain high operating leverage while capturing enterprise market share from outdated platforms and legacy e-commerce vendors.

Key developments to watch:

As generative AI and agentic shopping redefine how consumers purchase goods, Shopify's position as THE provider of digital storefronts creates an ideal environment for sustained growth.

Money market funds.

Barchart posted this the other day.

Looks scary right away.

Lots of money going into a risk free asset class.

Everyone is preparing for a crash!

Unless you know a little bit about treasury management.

See US firms have made and are making a tonne of money.

That money is in the form of cash on their balance sheet.

If these corporates keep that cash in a bank account, they’re making absolutely nothing.

So, why not keep the cash in something which is highly liquid AND able to make possibly an inflation beating return, for very little risk.

That’s all this is showing - it’s not showing any form of risk off sentiment (I mean, you could easily see this from how equities are behaving on their own)…

Yet the comments on X all rhyme with ‘this is bad’.

‘Stocks lower.’

‘Oooof.’

Stocks might go lower, but it’s not because corporates are parking their cash in money markets because they HAVE to.

One important thing with financial markets is to understand what the goal of each participant is.

For corporates, it’s to sell their product or service and manage their balance sheet as best possible.

And almost ALL of the contribution to money market funds is from corporate balance sheets - not because people are seeking safety.

Will the hyperscalers make money from AI?

This is the burning question.

And it’s one I can answer with a resounding YES.

Check this chart from Goldman out.

Currently, Microsoft is the only company with positive free cash flow.

And the SPX is still at highs.

Imagine what happens when Google, Meta, Amazon and Oracle return to positive free cashflow…

Now I’m not going to pretend I am the oracle of compute economics, but something tells me that at some point, the cost of compute has to fall - with this creates even bigger margins.

See you at 12k, SPX.