Between June 2024 and September 2024, billionaire investor Bill Ackman made significant moves with his hedge fund, Pershing Square Capital Management, by increasing his stake in shoe maker Nike (NYSE: NKE) fivefold. Ackman first invested in Nike in Q4 2017 but quickly exited his position in Q1 2018. In a notable turnaround, he returned in Q2 2024 by purchasing up to 3.04 million shares, and then made a further acquisition of 13.4 million shares in Q3 2024.
Bill Ackman’s Pershing Square’s Nike Transactions Overview
The following table summarizes Ackman’s key transactions with Nike:
| Period | Shares | % of Portfolio | Activity | %Change | Avg. Price |
| Q3 2024 | 16,280,338 | 11.15 | Add 435.51% | 9.07 | $88.40 |
| Q2 2024 | 3,040,132 | 2.20 | Buy | 2.20 | $75.37 |
| Q1 2018 | 0 | 0 | Sell 100% | 6.22 | |
| Q4 2017 | 5,836,020 | 6.22 | Buy | 6.22 | $62.55 |
This data highlights Ackman’s bold re-entry into Nike at a time when the global sportswear leader is facing significant challenges.
Nike’s Current Performance Overview
Nike, the world’s largest sportswear brand, is currently experiencing one of its toughest stretches. The company is grappling with consecutive revenue declines, a significant drop in market value, and increased competitive pressures. Below is a snapshot of Nike’s key performance metrics:
- No. of Common Stock: from 1.568 billion in 2020 to 1.482 in LTM.
- Current Stock Price: $75.41
- Market Cap: $113.48 billion
- Revenue CAGR Last 10 Years: 5.1%
- Revenue CAGR Last 5 Years: 3.7%
- Revenue CAGR Last 3 Years: 1.9%
- Cash: $9.76 billion
- Net Debt: $2.3 billion
- Free Cash Flow Margin: 11.3%
- Net Margin: 10%
Nike’s Quarterly Financial Performance
| Fiscal Year | Revenue ($ billions) | Revenue %Change | Earnings Per Share ($) | EPS %Change |
| 2019 | 37.4 | – | 1.6 | – |
| 2020 | 44.5 | +18.98% | 3.6 | +125% |
| 2021 | 46.71 | +4.97% | 3.8 | +5.56% |
| 2022 | 51.22 | +9.65% | 3.3 | -13.16% |
| 2023 | 51.36 | +0.27% | 3.8 | +15.5% |
The company’s stock is down 57% from its 2021 peak, and competitors like On Holding and Deckers’ Hoka brand are rapidly capturing market share and consumer attention.
Revenue Decline and Market Challenges
Nike is currently grappling with multiple challenges:
- Consecutive Revenue Declines: The company has experienced slowing revenue growth over seven consecutive quarters.
- Competitive Pressures: Rivals are quickly capturing market share as Nike faces both internal and external hurdles.
- Market Value Decline: A 10% revenue drop this summer, following a post-pandemic surge in 2022, underscores the pressure on the brand.
These challenges have forced Nike to reassess its business model amid a shifting competitive landscape.
Leadership Changes and Strategic Shifts
A significant factor in Nike’s current situation is its recent leadership change:
- Former CEO John Donahoe’s Exit: Donahoe was criticized for losing focus on Nike’s core strengths, making strategic decisions that included cutting ties with key wholesale partners and reallocating marketing budgets away from traditional brand-building efforts.
- New CEO Elliott Hill: Appointed to lead Nike’s turnaround, Hill is focused on:
- Reinforcing Nike’s sport-centric mission.
- Prioritizing innovation, design, and product development.
- Restoring Nike’s premium brand status to recapture market share.
Hill’s appointment is a key element in the company’s plan to address both internal management issues and external competitive pressures.
Latest Earnings Report: What Investors Need to Know
The latest earnings report reflects the ongoing challenges at Nike. In the fiscal second quarter, revenue dropped by 8% to $12.3 billion, and net income fell by 26% to $1.16 billion. This performance has left investors questioning whether Nike is a buy or a sell in its current state.
For many, the question remains: Is Nike stock ready for a comeback? With the company’s guidance indicating that the turnaround will be gradual—forecasting a low double-digit revenue decline in the third quarter and significant gross margin compression—investors face uncertainty in the near term.
Why Bill Ackman’s Bought Nike
Despite the short-term challenges, Bill Ackman’s significant investment in Nike indicates a strong belief in its turnaround potential. His current holdings total 16.3 million shares, valued at approximately $1.44 billion. Key points supporting Ackman’s contrarian bet include:
- Long-Term Growth Potential: Despite recent setbacks, the substantial decline in Nike’s stock price (down 57% from its peak) could offer significant upside if the company successfully implements its strategic turnaround.
- Historical Success with Distressed Assets: Ackman’s profitable bet on Chipotle during its crisis demonstrates his ability to identify turnaround opportunities.
- Support for New Leadership: Ackman reportedly backed Elliott Hill’s appointment, believing that the new management team can restore Nike’s competitive edge.
The Road to Recovery
Nike’s turnaround strategy involves several crucial initiatives designed to restore its premium brand image and market position:
- Restoring Premium Branding: Hill is focusing on shifting away from excessive discounting and promotions. By selling products at full price and liquidating excess inventory from less profitable channels, Nike aims to reclaim its premium status.
- Focusing on Innovation and Sport: The new CEO is emphasizing that Nike products must first meet the needs of athletes before appealing to consumers. Hill stated, “We lost our obsession with sport. Moving forward, we will lead with sport and put the athlete at the center of every decision.”
- Transitioning to a Pull Market: By creating a pull market where customer demand drives sales, Nike plans to reduce its reliance on aggressive marketing campaigns and rebuild strong relationships with key retail partners and sports leagues.
Is Nike a Buy?
Despite the challenging forecast for the fiscal second half, there is potential for Nike to return to profit growth within a year. The stock, having dropped 57% from its peak, offers significant upside if the company can successfully implement its turnaround strategy. Although Nike’s current earnings do not appear cheap, the long-term growth prospects could justify an investment for those with patience.
Nike’s current struggles and the strategic turnaround plan led by Elliott Hill present a classic dilemma for investors. With significant competition, ongoing revenue declines, and a cautious short-term outlook, the path to recovery will require time and effective execution. However, with Bill Ackman’s contrarian bet and a renewed focus on core strengths, Nike has the potential to bounce back and regain its position as the leader in the sportswear industry.
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