[00:02:38] Shawn O’Malley: Just a few years ago, though, it would have sounded absolutely absurd to say this, but Nike is actually in a very tough spot now. Its stock is down 60% from 2021, all time highs. And it’s down by more than 10% this year in 2025. So today we will break down what is wrong with Nike, where the company stands, and how it could reclaim its place as a long-term winner.

[00:03:02] Shawn O’Malley: But before we do that, let me thank today’s sponsor Airbnb for helping us bring financial education to our listeners. While Daniel and I are sitting in our usual home offices, we could just as easily be recording this from a cozy cabin in the woods or a beach house in Italy. Airbnb makes it easy to find and book unique stays and experiences wherever you want to go.

[00:03:24] Shawn O’Malley: Alright, Daniel, out of our boring living rooms and into the Nike story, tell us what you heard from Nike.

[00:03:30] Daniel Mahncke: Thank you, Shawn. But now you made me think about sitting on a beach in Italy. Anyway, I’m sure today’s episode will be just as much fun and also a lot more educational as you said. I guess we can keep today’s introduction rather short because very few, if anyone in the audience will have never heard of Nike, thanks to its innovation, and even more so to its iconic marketing campaigns, and you just mentioned Jordan.

[00:03:55] Daniel Mahncke: It has become the global leader in the athletic footwear and sportswear segment. It’s fair to say that Nike is responsible for how modern marketing in any sport, and perhaps even beyond that works in today’s world. But while Nike’s history has largely been a success story, the winning streak kind of came to an unexpected and also a sudden halt in the last few years.

[00:04:21] Shawn O’Malley: How about you give us something about Nike’s successful history here before we kind of ruin that mood with the current outlook for how things have been? Do you mind just painting some color around how they shaped the modern sports and marketing worlds?

[00:04:34] Daniel Mahncke: Yeah, that sounds good. I mean, Nike is still a pretty young company if you compare to most of its long-term competitors.

[00:04:41] Daniel Mahncke: It was founded by the track and field coach, Bill Bowerman and his former student, Phil Knight. It was originally named Blue Ribbon Sports, and it’s sold imported Japanese made running shoes, and they did so because they saw how the Japanese cameras back in the day replaced the well-established German brands who were famous in the US and they thought, well, if that works for cameras, maybe the same could also happen with shoes where the German brands, Puma and Adidas were dominant as well.

[00:05:12] Daniel Mahncke: But by 1971, the relationship to its Japanese partner, which was called Onitsuka Tiger, has began to decline in response, Phil Knight and Bill Bowerman then decided to produce their own shoe lines. Those were the first shoes that were then sold under the today famous name Nike, based on the suggestion of the first employee, Jeff Johnson and inspired, and I think that’s a pretty known story by now by the Greek Goddess of Victory.

[00:05:42] Daniel Mahncke: The iconic Nike Swoosh was designed by a college student and it actually just cost $35, which seems like a pretty good deal if you consider that. Forbes today estimates the value of the Swoosh to be around $26 billion. Co-founder Phil Knight and his first employee, Jeff Johnson, started out humble. They started selling Nike shoes out of their cars on track fields.

[00:06:08] Daniel Mahncke: The strategy was pretty successful, and it actually turned out that Johnson was an even better salesman than Phil Knight. What a lot of companies do today is they put together a mailing list, and you could say that Johnson was kind of building the first ever mailing list. He wrote down details of customers like shoe size, shoe preference, favorite running distance, and also upcoming competitions.

[00:06:34] Daniel Mahncke: And then based on that, he kept in touch with them, so he wished them well for upcoming races. He gave them training tips. And of course, like every good salesman, he gave them updates on Nike’s new shoe models. The first 50,000 shoes were basically sold through word of mouth and the persistence of Knight and Johnson.

[00:06:54] Daniel Mahncke: However, word of mouth only works if you actually have a product that is superior. And because of that, Nike was focused on innovation. One of Nike’s first groundbreaking innovations was the Moon Shoe in 1972. Co-founder Bill Bowerman created this shoe and its shape, was inspired by a waffle iron, it got its name because it left a footprint on the ground.

[00:07:19] Daniel Mahncke: That represented the famous imprint. The astronauts left on the moon in 1969. Nike only had produced 12 pairs of those shoes, so you cannot say they became a crucial product for Nike. But in 20 19, 1 of them actually auctioned for far over $400,000, making it the most expensive sport shoe ever. The Moon Shoe was somewhat of a Kickstarter for Nike’s ambitious journey of creating the most advanced running shoes in the world.

[00:07:51] Shawn O’Malley: I remember seeing the movie Air in theaters in 2023, and, and whether you like the film or not, it only added to Nike’s brand value, I’m sure, by helping build the company’s mythology, which is pretty legendary at this point, obviously. And, and things like the Moons shoe you described certainly helped with that too.

[00:08:09] Shawn O’Malley: And that movie is really just dialed into a moment and time about how Nike reshaped its identity by signing Michael Jordan and. Really making this massive bet on him and also giving him a completely unprecedented deal where he’d get a percentage of his total shoe sales indefinitely. But as you’ve kind of covered here, there’s such a rich backstory that extends beyond the Jordan stuff too.

[00:08:34] Shawn O’Malley: And that isn’t news to anyone who read the book Shoe Dog. But still, it’s so cool that the same hustle that the brand epitomizes in the sports world is quite literally how the company got its start too. And that just to me, makes it feel so much more authentic. And I dunno, just imagine if some rich kid had started Nike with a big loan from their parents, it just wouldn’t be the same.

[00:08:56] Shawn O’Malley: It would be a totally different story and would have a different identity. And I don’t think the company could stay as relevant for as long as it has if it didn’t have this dramatic story of hustle and resilience baked into its origin. So I, I think I kind of interrupted you though. So as we continue in the story of Nike.

[00:09:14] Shawn O’Malley: What are the next big milestones for them?

[00:09:17] Daniel Mahncke: No, you’re you’re absolutely right. I mean, the magic behind Nike is its humble beginnings, and it’s not by accident that Nike is one of the few $100 billion companies where culture is still at the core of the business. But getting back on track, Nike’s journey first, they have mass produced the Moon shoe technology because, like I said, 12 pairs of shoes are great, but they cannot push our revenues through the sky.

[00:09:41] Daniel Mahncke: So they chose the not so athletic sounding shoe line waffle trainer, and it actually, despite its name performed very well. And it became one of the best selling running shoes in the country. And then there were some innovations following that shoe, and one of the most famous one was the Nike shocks.

[00:10:01] Daniel Mahncke: They used racing car materials to absorb impact and then provide responsive energy and return. That was a marketing text, but that’s actually what the shoe did and it gained some fame after Vince Carter dunk at the 2000 Olympics over a seven foot two opponent. You know, those are the kind of pictures that make a shoe famous and that make a 7-year-old star dreaming about, you know, dunking in the NBA or at the Olympics.

[00:10:28] Daniel Mahncke: In 20 years time, Nike’s product focus and the ongoing improvement of their shoes have always been at the core of their success. But the next big milestone, and you’ve kind of teased, was the partnership with Michael Jordan, which has forever changed how sports brands market their product. When Nike approached Jordan, he was just a promising young player in the NBA who desperately wanted to sign with Adidas.

[00:10:55] Daniel Mahncke: But Adidas passed and Nike wanted him, no matter the cost. The plan was to create a new shoe line exclusively for Jordan, and they hoped to sell about a million dollars worth of the so-called Air Jordans annually. And because of that, they spent their entire marketing budget on signing him, which back then was a five year deal over $2.5 million, which is pretty laughable at today’s standard.

[00:11:20] Daniel Mahncke: I mean, Cristiano Ronaldo and LeBron James both have signed $1 billion lifetime contract with Nike, but compared to the company’s size, the John deal was actually much bigger. And as you mentioned, he did not only get $2.5 million a year, Michael Jordan has since made billions through his lifetime share in Jordan sales.

[00:11:40] Daniel Mahncke: And for Nike, it paid off tremendously as well. In its first year Jordan’s generated sales of far over $120 million and the lasting impact. Is not only visible in sales numbers, I mean by now the sales number exceeds $6 billion, but it’s even more evident in how the sports industry has changed. The Nike Jordan deal actually turned athletes into individual brands, and today this is a billion dollar industry in pretty much every global sport in the world.

[00:12:13] Shawn O’Malley: I love the way you put that. Jordan Steele with Nike really did turn athletes into brands. I think that’s so true, and professional athletes have really been the ones to reap the rewards of that, of course, at least for those, at the very top of their sports and who are famous enough that you can actually build a brand around them.

[00:12:34] Shawn O’Malley: So we, we can’t emphasize enough that not only did the Jordan deal change Nike’s fortunes, but really it changed the direction of an entire industry, the entire sportswear industry. And for as much as Jordan has been paid by Nike, as you said, he’s probably created considerably more value for them. And that’s saying a lot, given the fact that he’s a billionaire now.

[00:12:57] Shawn O’Malley: But with that kind of conversation aside about the history of Nike, why don’t you give us an overview of Nike’s business today, Daniel, besides footwear, what do they sell and where in the world are they most popular? Any of that kind of stuff.

[00:13:10] Daniel Mahncke: Yeah, I mean, there won’t be any huge surprises. Nike operates three brands, which are the Nike brand, then obviously the Jordan brand, and also Converse, which was acquired by Nike in 2003.

[00:13:23] Daniel Mahncke: And while Converse only makes up 4% of revenues and has performed relatively poor in 2024, the acquisition was an overall success. Converse has high margins, so its Share on Profits is usually double their revenue share. And it had in the high teens since Nike acquired it. So while it’s not a big part of revenues, it was a successful investment.

[00:13:46] Daniel Mahncke: And it deserves a mention here. If we look at Nike’s biggest markets, unsurprisingly, most of its sales come from North America and specifically the us and then that’s followed by Europe. The share of slightly below 30% and the last third is equally split between China and Latin America. I mean, generally, you can say Nike is perhaps the most global brand that we’ve yet covered.

[00:14:11] Daniel Mahncke: It’s in about 190 countries, and I think there’s not a single country on this planet where you do not know this. Whoosh, product-wise, Nike’s main focus is the footwear segment, which makes up almost 70% of sales. And if there is a product that still perform well in 2024. It is the Jordan eight out of the 10 most popular Nike sneakers last year have been some form of Jordan models.

[00:14:38] Daniel Mahncke: And then you have the apparel business, which is obviously not as big as the footwear business, but it does make up the remaining sales, which is almost 30% of the business. Some of the all time favorites. There are the iconic Nike tech lines, and then last and also least Nike sales equipment like soccer or baseball, leg guards or yoga mats.

[00:15:02] Daniel Mahncke: But that part really only makes up 4% of the business and it isn’t growing for years now. So it’s pretty neglectable in the bigger picture of Nike. More interesting is the distribution across sales channels because it’s the only part of Nike’s business that has seen major changes in the last five years.

[00:15:22] Daniel Mahncke: Before the pandemic, Nike sold almost 70% of its products through wholesale partners. Since the pandemic, the wholesale share decreased steadily and probably another year under Donahue, who’s Nike’s previous CEO would’ve meant that Nike reached a 50 50 split between wholesale and direct sales.

[00:15:43] Shawn O’Malley: It reminds me of the conversation we had recently with the Luxury Jacket company, Moncler, where they actually had benefited from going more DTC.

[00:15:53] Shawn O’Malley: So what was former CEO John Donahue’s role in that transition, and what do you make of this switch to the new CEO Elliot Hill?

[00:16:01] Daniel Mahncke: Well, by now, I kind of have to reevaluate my stand on management week in, week out. I’m sitting here mentioning that the CEO of a $100 billion company can only have a very limited impact on the actual business.

[00:16:16] Daniel Mahncke: And yet again, this time I will tell you, oh, it’s different because X, Y, Z. Nike’s new CEO. Elliot Hill has over three decades of experience with Nike. He began his career back in 1988 as an intern with the company and for perspective, while Nike seems like it’s around for a hundred years, in 1988, Nike’s market cap was just $700 million.

[00:16:40] Daniel Mahncke: Today, it would take Nike about five days to generate that amount of money. Hill worked his way through 19 different worlds and experienced and also shaped Nike’s successful rest to the top of the industry until he retired in 2020. John Donahue was the complete opposite. Nike didn’t bring him up internally.

[00:17:01] Daniel Mahncke: He joined from outside, which is not very typical for a Nike CEO. The company only had three CEOs prior to Donahue, and two of them. One of them was Phil Knight. Had decade long experience at Nike before, and both stayed CEO for far over a decade. The other one is William Perez. He was an outsider and he only served as CEO for about two years, and then he resigned after quote, not being a good fit.

[00:17:31] Daniel Mahncke: Culturally, the story seemed to repeat itself with Donahue. He was described as leading Nike like a consultant would, which is not that surprising since he has been a consultant for 20 years and he eventually even became president and CEO of Bain & Company, which is one of the biggest consulting companies in the world.

[00:17:53] Shawn O’Malley: So why was Donahue even made CEO in the first place then, considering that experience with Perez? Right. Did they, did the board learn nothing from that mistake they had made?

[00:18:03] Daniel Mahncke: Well, in addition to his consulting background, Donahue served as CEO of eBay and ServiceNow, and he also had some experience at PayPal because he was chairman of the board.

[00:18:14] Daniel Mahncke: So he had a strong background in e-commerce. Under Mark Parker, who was Nike’s previous CEO before Donahue joined online sales, gained significant traction. And because of that, Nike decided it would probably be a good idea if we double down on that part of the business now to level up their DTC game, Donahue seemed like the perfect man for the job.

[00:18:39] Daniel Mahncke: Not only did he have an e-commerce background, but he also served on Nike’s board since 2014. So you would think that he kind of knew the company. And in contrast to William Perez, he also was supported by the still influential co-founder for Knight. And that’s why the board decided to make him CEO. And at first it did look like a huge success online.

[00:19:04] Daniel Mahncke: Say it’s doubled and cost the $10 billion mark. And while the pandemic has obviously helped, there were many good reasons to believe that path could continue even beyond the pandemic. In 2020 and 2021, e-commerce has exploded. But even after that, and just last year, e-commerce sales still increased by almost 10%.

[00:19:27] Daniel Mahncke: And that despite standing at almost $4 trillion and $4 trillion just for perspective, is about the size of the Indian economy. And the second point is customer convenience. The pandemic reinforced the habit of conveniently ordering from home, and many experts expected this habit to be even more sticky than it then turned out to be.

[00:19:51] Daniel Mahncke: And then last but not least, you have Nike’s brand. The company believed it would be strong enough for people to go the extra mile and shop at Nike directly. I mean, you just mentioned it worked for Moncler, and if you compare Moncler to Nike, it doesn’t seem delusional to think Nike probably has a stronger brand power.

[00:20:10] Daniel Mahncke: Well, it turned out much stronger. Much stronger actually, but it turned out a bit differently. There’s a funny quote. John Donahue famously introduced the new DTC paradigm by saying:

[00:20:22] John Donahue: Consumer today is digitally grounded and simply will not revert back

[00:20:26] Daniel Mahncke: A sentence that hasn’t aged too well. Not only did people go back to physical stores, they specifically went back to wholesalers like Footlocker or DSW.

[00:20:38] Daniel Mahncke: If you wanna dig deeper into why it’s so hard for non-luxury brands to win the DTC game, you can also listen to our Moncler episode. Nike still thought it could pull it off due to its presence in consumer’s minds. In psychology, you would call this the availability heuristic. We prefer what comes to our mind easily, and when consumers look for shoes online.

[00:21:02] Daniel Mahncke: They often Google a certain brand instead of a wholesale store, and more often than not, they end up on Nike’s page. But after the pandemic, people were desperate to get out again and to get the full shopping experience. And there are simply more wholesale stores than Nike stores. So people naturally went there, and historically they would find Nike shoes at pretty much all of those stores.

[00:21:29] Daniel Mahncke: But that has changed. And since consumers in the footwear space, at least outside of luxury brands, care about getting the best quality for the best price. They’re not loyal to Nike when they can find that with other brands as well.

[00:21:46] Shawn O’Malley: Sort of presumptive for a company like Nike though, to assume that their products alone can draw on enough customers to support a full retail footprint.

[00:21:55] Shawn O’Malley: It was a Nike outlet near me where I live, and I don’t think I’ve gone to it. I I’ve probably gone to it once, exactly once, and it’s nothing against Nike, but. If I was looking for sportswear or equipment, which I don’t necessarily do all that often anyways, I’d much rather just go to a more diversified retailer like Dick’s Sporting Goods, which is this massive, massive sports retailer.

[00:22:14] Shawn O’Malley: And of course there they have a very wide sampling of products and brands to choose from, whether it’s tent equipment or hiking gear or basketball shoes and basketball clothing. They have it all. So I’d also say that for two decades now, going back to Nike, we, we keep getting told that brick and mortar shopping is dead, and that just has not been true.

[00:22:37] Shawn O’Malley: Most retail spinning is still by far at physical stores, even if online shopping has grown massively. And it sounds like Nike was not only too confident about their own DTC capabilities, but also what trends in online shopping would look like. As you know, we’ve got Ulta as one of our portfolio companies, Daniel, and they have hundreds of different brand partners in their stores.

[00:23:01] Shawn O’Malley: The beauty industry is a little different, but the point is that that just makes much more sense to me than going to a store that only has L’Oreal or Elf products. And even when I was in high school playing sports, I love Nike, but I think I still would’ve preferred to go somewhere like Dick’s or Footlocker over a single Nike store.

[00:23:21] Shawn O’Malley: It’s not like I was a complete Nike fanboy who was, you know, so obsessed with Nike that I, I would be super excited to go to it an exclusively Nike store. And even if I was most likely going to end up buying a Nike product, why wouldn’t I also wanna browse what Under Armour has, for example. So to me, that wider selection is the advantage that a Footlocker outlet can offer, which is obviously not to say that Footlocker doesn’t also drive a ton of sales for Nike still.

[00:23:49] Daniel Mahncke: I mean, Footlocker has actually been one of Nike’s most important partners.

[00:23:54] Daniel Mahncke: In 20 20, 70 5% of Footlocker’s inventory was occupied by Nike and the Jordan brand after Nike’s decision to reduce wholesalers. The share drop by over 20%, which put Footlocker in a very bad position. And it’s a good example of the permanent damage Nike cost by its rushed withdrawal from the wholesale business.

[00:24:19] Daniel Mahncke: Since then, Footlocker has diversified its inventory taking on brands like HOKA and on Nike lost a competitive advantage they perhaps didn’t even know they had. I know that you’re a fan of companies like Spotify, Airbnb, or Uber. We’ve also discussed some of them in this podcast. They’re similar in that all of them democratized and diversified their respective industries.

[00:24:46] Daniel Mahncke: Spotify enabled thousands of musicians to publish their music and break the monopoly of labels. Airbnb turns private people into hosts breaking the hotel monopoly, and Uber broke the taxi monopoly by turning ordinary people like you and me into taxi drivers. Nike had the advantage of a little diversified playing field for decades because they were so dominant in the wholesale business.

[00:25:13] Daniel Mahncke: It kind of created a reinforcing cycle. Nike was in pretty much every store and generating the strongest sales, which made wholesalers eager to stock even more Nike products. When Nike cut this relationship, it opened the gates for a more diverse playing field. The comparison might be a bit abstract, but what I’m getting at is that wholesalers turned into a platform that diversified the industry after decades of solely fueling Nike’s growth.

[00:25:46] Shawn O’Malley: So what would you say the new competitive landscape for Nike looks like now?

[00:25:50] Daniel Mahncke: Actually, I thought it might be my German buyers working here, but the numbers backed my feeling that for the longest time, the shoe market was dominated by just Nike and Adidas. Globally the two control 25% of the athletic footwear and apparel market with a 60 40 split in favor of Nike.

[00:26:09] Daniel Mahncke: Historically, the US has been a stronger market for Nike and more challenging for Adidas, but in the last 10 years, Adidas almost doubled its market share to about 11%. Now, while Nike struggled to grow further, I mean it still has doubled the shelf Adidas and multiples of any other brand. Speaking of other brands, two companies that have been discussed a lot recently are the French brand HOKA and the Swiss brand On.

[00:26:38] Daniel Mahncke: Both of them exploded in the pandemic era. Many people started running as a new hobby, and as you well know, of course you need new and the best running shoes to do that. Some years ago, Nike probably would’ve been the first company that comes to your mind then, but Nike hasn’t been known for innovative running shoes for quite a while now.

[00:27:01] Daniel Mahncke: And their focus on fashion has left a vacuum in that space. And both on and HOKA are founded by athletes who design shoes with new, exciting technology from their own experience as an athlete.

[00:27:16] Shawn O’Malley: What would you say makes HOKA and on so special? I, I see them both at the gym all the time, but I’m also not confident that this isn’t just some passing trend in footwear popularity either.

[00:27:31] Shawn O’Malley: And I’m sure that when shelf space is free, wholesalers probably want to fill spots with new brands if they can. But why rely on newer and smaller brands instead of say Adidas, Puma or Reebok?

[00:27:45] Daniel Mahncke: Well, on and HOKA have used the same playbook that we have discussed once again in our Moncler episode. They went from niche to mainstream.

[00:27:55] Daniel Mahncke: Pretty much every successful brand used that playbook when they had to compete with much larger and more dominant competitors. Lululemon, for example, started in yoga and then expanded into the mainstream by doubling down and also creating themselves the athleisure trend on, and HOKA both did it with a strong focus on running a market that, like I said, Nike has neglected for quite some time now, and each of them address a different customer on shoes are very minimalistic and aimed at the premium customer.

[00:28:28] Daniel Mahncke: That’s why they have high margins and half of their sales go through their DTC channels. HOKA took the exact opposite approach with its very colorful look and they kept the focus more to the functional side. And I agree this might be a fate, but it’s not only those two brands that pressure, Nike, even sketches, had double digit growth last year.

[00:28:52] Daniel Mahncke: So Nike is losing market share across the board. Premium customers go to on running enthusiasts go to HOKA, and more price sensitive customers go to sketches. And this is just a small part and only the competition in the western world. China has brought up its own competitors, most notably enter and leaning.

[00:29:13] Daniel Mahncke: Perhaps, you know, enter since you’re an NBA fan, I must admit, I didn’t know them before, but Enter has overtaken Nike’s China division in sales back in 2022, and it’s also tapping into the US market. A collaboration with Dallas Mavericks, point guard carrier. Irving has seen demand for enter shoes in the us skyrocket and golden state guard.

[00:29:36] Daniel Mahncke: Clay Thompson already left Nike to sign with enter back in 2017. And I know all of this sounds a bit drastic and I’m basically emphasizing on this. But it still makes sense to take one step back and then remind ourselves that all this competition and all these strategic mistakes over the last couple of years has quote unquote only resulted in the loss of 1% of global market share.

[00:30:03] Daniel Mahncke: For Nike, for perspective, apple has a competitively large share in the smartphone market. And just like Nike, apple has lost 1% of that market share in the last couple of years. Nike shares have since fallen 60% from its all time highs. Apple shares still trade only 13% on its all time high. And I know this comparison lags in many, many ways.

[00:30:29] Daniel Mahncke: Apple’s financials do not even remotely show the same downward trend, but there are some similarities. Both companies experience market share decline, both face tougher competition globally. Especially overseas in China, and both trade at the same pe, which just shows you how much investors are willing to pay for $1 of earnings.

[00:30:50] Daniel Mahncke: So for example, if Nike earns $1 per share at a PE of 35, investors are willing to pay $35 for a Nike share. That’s pretty high, and that only means they give Nike the benefit of the doubt because it’s a strong brand with a lot of history. If I would have to summarize the competitive dynamic, I would say that barriers to entry came down significantly through e-commerce and also social media marketing.

[00:31:19] Daniel Mahncke: I mentioned how Nike turned athletes into individual brands, but social media has turned pretty much everyone into an individual brand if they use it the right way. 10 or 15 years back, the companies that were able to sign the big athletes were pretty much untouchable, and Nike had a head start after signing Michael Jordan and initiating this trend.

[00:31:40] Daniel Mahncke: Today, social media has created millions of those new personal brands, and Nike and Adidas just do not have the same control over celebrity endorsements anymore. And also over what brands could come up.

[00:31:55] Shawn O’Malley: Despite that strong growth from HOKA and on, we shouldn’t forget that Nike still has a pretty dominant position.

[00:32:03] Shawn O’Malley: As you’ve said, from the numbers I’ve seen, Hocus revenues are like $1.8 billion and ons are a little short of $3 billion. Yeah. When you look at Nike, its annual sales are gigantic at, I think, north of $50 billion, maybe $51 billion. And for the record I rounded down there by a little bit, probably by a couple hundred million dollars, which for Nike is a rounding error.

[00:32:28] Shawn O’Malley: Whereas for HOKA and on, that’s like five, 10, 20% of their entire business. And so that alone sort of makes the point. Maybe it’s too easy to dismiss things to call HOKA and on rounding errors, but in a way they are, at least in the big picture here, based on the lower barriers to entry in this industry that we’ve seen as new competitors pop up all over the place.

[00:32:55] Shawn O’Malley: And the failure of Nike’s DTC initiative as well as competition taking market share too. How big is Nike’s moat, really? And is there even a moat?

[00:33:07] Daniel Mahncke: Let me just say one comment to you because I like your comparison about the running era. Actually, Nike’s revenues are 51.2 billion, so you run the down by 200 million, which just a couple of years ago was on total revenue.

[00:33:21] Daniel Mahncke: So that shows two things. First on is growing fast, and secondly, as you mentioned, on is still incredibly small. And if they want to continue to grow, starting from a larger base. It will get more and more difficult. But now getting to your question about the mode, because it’s a good question, and a couple of years ago I would’ve said, of course Nike has a mode, and I would still say that Nike has competitive advantages that set it apart from companies like New Balance, Puma on and HOKA.

[00:33:53] Daniel Mahncke: But the question is how big is Nike’s mode and where does it show in the numbers? Buffett was asked about Nike on several occasions doing his annual shareholder meetings in Omaha, and this is the answer he gave:

[00:34:07] John Donahue: I don’t understand their competitive position and the likelihood of permanence of their competitive position over a 10 or 20 year period.

[00:34:16] John Donahue: As well as, I think I understand the, the position of Brown and Dexter.

[00:34:21] Daniel Mahncke: A few years back when I first heard Buffett say this. I didn’t fully understand what he meant. For me, Nike seemed like an easy to understand business that would fit right into Buffett’s love for high quality brands that he gained after his See’s Candy investment that you and I also discussed on the Hershey episode.

[00:34:41] Daniel Mahncke: But I have since come to realize that a strong brand name is not necessarily a mode as where Damodaran, who is n NYU’s valuation professor, and he’s famously called the Dean of Valuation, likes to ask, where does the mode show in the numbers? A competitive advantage needs to show somewhere it’s either higher margins, it’s higher returns on capital, or just faster growth.

[00:35:07] Daniel Mahncke: In Nike’s case, gross margins, which describe what percentage of revenues remain after you subtract the cost of goods sold are significantly lower than competitors standing at close to 45% while Aidas is above 50%. On also due to its premium positioning exceeds 60%. This picture changes when you look at the operating margins win.

[00:35:32] Daniel Mahncke: Nike is close to the top of the industry, and operating margins not only include the cost of goods sold, they also include all the costs cost by operating expenses, so salaries, rent, and marketing. And while returns on capital have come down since the Donahue tenure, they still average in the mid twenties, which signals very good use of capital and definitely could be assigned for a strong moat and still with less growth and a mixed margin picture.

[00:36:05] Daniel Mahncke: The obvious answer to Nike’s mode would be it’s in the market share dominance you just gave the numbers despite growing fast on in HOKA, are both well below 1% market share and continuing to grow. Like I said, we’ll be a lot more difficult in the future. We just mentioned Buffet, and that even he didn’t understand the actual power of Nike’s brand.

[00:36:29] Daniel Mahncke: He later said that Dexter shoes had been his worst investment ever and that he misjudged Dexter’s competitive advantage. What he saw in Dexter was a quality per cost mode, which means that they could produce cheaply considering the high quality US production. The problem was that consumers didn’t care too much about US production.

[00:36:51] Daniel Mahncke: When Chinese producers came and they caught up in quality and offered much lower prices than companies like Dexter, the value proposition just became obsolete. Nike’s mode is based on its marketing success through collaborations with the biggest sports athletes in the world, for example, Michael Jordan.

[00:37:11] Daniel Mahncke: But the resulting brand awareness wasn’t its only moat. As Manchin, Nike’s wholesaler dominance was crucial as well. But perhaps that’s not an actual mode. It’s more of a legacy position that kept working because wholesalers had no incentive to cut the relationship. Unfortunately, for Nike, they underestimated their own legacy advantage and they cut it themselves.

[00:37:37] Daniel Mahncke: Perhaps without having the most innovative products. The actual brand value of Nike is less important than one would’ve thought.

[00:37:47] Shawn O’Malley: It’s probably safe to say that you are not too convinced that Nike has a strong moat. I wouldn’t say it like that.

[00:37:54] Daniel Mahncke: I think Nike is at a difficult middle ground. If you would ask a hundred people outside on the street to name one sport brand, I would bet the majority of them would say Nike.

[00:38:05] Daniel Mahncke: Even here in Germany where you have homegrown brands like Aida and Puma, if you’re the first brand that comes to mind for every consumer that has to count for something. That’s where the market share numbers and also the higher operating margins. Proof consumers are still willing to pay a premium for Nike.

[00:38:23] Daniel Mahncke: At the same time, the DTC failure showed that Nike doesn’t have the same pull as a luxury brand. In the end, Nike has to be product focus. If they don’t deliver on the product side, their brand power is not enough to keep consumers buying, especially if you want to charge premium prices. And that’s where Elliot Hill sees the root cause of all problems they just didn’t deliver on the product side.

[00:38:50] Daniel Mahncke: There were no shoes in recent years for people to actually get excited about.

[00:38:55] Shawn O’Malley: Why do you think Nike has missed this fashion cycle almost and is really no longer at the forefront of innovation? When I think about some of the big trends in athleisure with yoga pants or premium sweatpants, or even with birken socks becoming so big.

[00:39:10] Shawn O’Malley: I can’t help but think that Nike has completely missed out on what is really popular today, at least in the us, and doesn’t really have the offerings it needs to be relevant in 2025 to middle and upper middle class consumers.

[00:39:24] Daniel Mahncke: You know, it’s so funny how you mentioned Bienstock because those are shoes here in Germany considered to be worn by my grandpa, but apparently in the US and many other places in the world, they’re actually getting hyped again.

[00:39:37] Shawn O’Malley: They’re very trendy.

[00:39:39] Daniel Mahncke: You know, that’s, it’s weird for me to hear, but it once again shows how Nike is losing market share with every consumer. But getting back to your question, while there are many factors that played into this, the main ones are the strategic shift to DTC and the over reliance on Nike’s classics.

[00:39:59] Daniel Mahncke: Historically, Nike’s CEO were always product focused guys, but Donahue prioritized DTC expansion. That diverted resources and attention from developing new innovative footwear. It was about quickly having new product for the online channel that changed how Nike sold its products. Nike is usually successful in a so-called pool market, and a pool market means that Nike creates the demand.

[00:40:29] Daniel Mahncke: They make great shoes that athletes love, and they carry them out into the world. The premise is that Nike launches a shoe first and then creates demand for it. In the last few years, Nike operated in a push market. They try to guess what consumers want, and then created the shoe that fits that preference.

[00:40:49] Daniel Mahncke: The problem with that is that it doesn’t work well for Nike. A company of that size operates just too slowly to be successful at that game. When a shoe is released, the consumer preferences have long shifted the. And that’s why Nike repeatedly doubled down on successful legacy models like the Air Jordan or the Air Max.

[00:41:11] Daniel Mahncke: And those are great shoes, but if you flood the market with these models, they just lose their appeal.

[00:41:18] Shawn O’Malley: Earlier in our conversation, you gave a little introduction to Elliot Hill and explained why Donahue wasn’t the right fit for Nike. When Hill came back, there was a huge wave of relief for the company and also from Wall Street, and I’ve yet to hear anyone that doesn’t think Hill is the right guy to, to run the show.

[00:41:39] Shawn O’Malley: Why is he so beloved and what is his plan for Nike going forward?

[00:41:45] Daniel Mahncke: I repeat myself, but I have to say it again. Because Nike emphasizes on it so strongly. Hill is a product focused guy. He knows about the importance of relationships, and he immediately traveled the world and visited wholesalers, Nike factories, and also athletes to help Nike to get back on its feet.

[00:42:06] Daniel Mahncke: He announced the Win Now Initiative. In the near term, the strategy is to get back to a culture of obsessing over sport and accelerating the new quote, super innovation cycle driven by athlete insights. On the marketing side, he wants to increase investment in big, bold marketing statements. Just recently, you probably saw it, Nike spent $16 million on its first Super Bowl a since 1998.

[00:42:35] Daniel Mahncke: By signing Kaitlyn Clark on a $28 million deal. They doubled down not only on women’s basketball, but they also secured one of the most popular athletes in the us. And a sponsoring deal that is more personal to me is Nike’s $700 million deal with the German football national team. They ended a 70-year-old partnership between Adidas and the German Federation.

[00:43:00] Daniel Mahncke: And let me tell you, it has been a nationwide upset.

[00:43:04] Shawn O’Malley: I’d imagine that it’s not really a big surprise that that is such a big controversy to have an American company displace a German company like Adidas as a sponsor for Germany’s national football team, right? That’s not a big surprise to me.

[00:43:21] Shawn O’Malley: I, I, I can totally see why that spurred some controversy over there.

[00:43:25] Daniel Mahncke: At the timing couldn’t have been worse because. It was just two or three months before the European Championship in Germany. So the hype was huge, and Nike pretty much made a tremendous deal of that because they just went into that hype signing that deal, and the entire country talked about that deal for at least a week.

[00:43:45] Daniel Mahncke: But getting back to health strategy, there’s another pillar, and that’s the restructuring of Nike Direct, which he wants to be a premium destination. Again, according to Hill, Nike has become too promotional. And while I, at least from a consumer perspective, like buying Nike at cheaper prices, I was also surprised to see all the discounts on Nike’s products in recent years.

[00:44:09] Daniel Mahncke: I cannot remember that the same happened when I was a kid, and Nike is still seen as a premium brand, so discounts hurt their image, especially on the more fashion focused products. Nike’s unpredictable discounting. Also heard wholesale partners were forced to adjust prices as well. Hill is now working on getting these partnerships back on track, demanding a strong commitment and stating that Nike has to quote, earn its way back to the shelves.

[00:44:41] Shawn O’Malley: When I pulled the numbers for Nike’s latest earnings, it was not a pretty picture it, it does not seem like Nike’s winning. Now, would you say that Hill’s plan is not working or is there some reason the progress isn’t visible yet?

[00:44:56] Daniel Mahncke: Honestly, Nike’s numbers look pretty terrifying if you look at them for the first time, and calling it the winnow strategy is probably more of a marketing stand win later, just doesn’t have the same flow.

[00:45:10] Daniel Mahncke: Elliot Hill himself said that quote, I recognize that some of these actions will have a negative impact on our near term results, but we are taking the long-term view here. This fiscal year, Nike sales declined 9%, which is huge, but still looks decent if you compare to the 30% decline in profits. Margins are also down across the board caused by the measures to decrease inventory and the resulting discounts.

[00:45:39] Daniel Mahncke: And it got even worse because the market hope to see that the pain is only short term and that the next quarter would be better. But instead, the outlook for the next quarter is even more grim. Nike’s CFO Matthew Friend expects further revenue declines in the mid-teen range and gross margins decline of up to 5%.

[00:46:00] Daniel Mahncke: That might not sound too much at first glance, but considering Nike’s revenues a 5% decrease in gross margin results in a loss of about half a billion dollars.

[00:46:11] Shawn O’Malley: That that makes sense and, and that’s sort of what you would expect from a company that at least at one time had very deep moats and is now arguably seeing those moats recede.

[00:46:21] Shawn O’Malley: In real time before us. Maybe that manifests as a top line hit that reduces market share or a profitability hit as their pricing power gets reduced and they’re making massive investments to try and defend their position. Or maybe, as we’ve seen with Nike, it’s both and all of that sounds very grim, but I, I don’t think you would pitch Nike today if you didn’t think there was some reason to see light at the end of the tunnel.

[00:46:45] Shawn O’Malley: Right?

[00:46:46] Daniel Mahncke: That’s true. I mean, one portfolio manager said, and I think that’s pretty spot on. It’s a portfolio manager’s dream and an analyst’s nightmare. And there are several super investors who took a position, which would kind of suggest that many people see it this way. The most notable one is Bill Ackman, who has over 10% of his portfolio in Nike.

[00:47:08] Shawn O’Malley: Ackman also has a big stake in the company I’ll be pitching next week without getting into politics or anything like that. I, I do think his reputation has maybe taken a bit of a hit in more recent years, but also over the last decade. Did a whole podcast on Ackman a few months back, and it’s undeniable that he’s a really bright and hugely successful guy, but he’s also made some very public mistakes and done some shady things in his more distant past.

[00:47:32] Shawn O’Malley: And more recently, he seems to be spending a lot of time on Twitter, maybe too much time. So I don’t know. It doesn’t really move the needle for me to hear that he likes Nike, but I, I guess it doesn’t hurt.

[00:47:43] Daniel Mahncke: I mean, I mentioned Mund because I knew that you would have at least an opinion on him. I’m not big on cloning super investors either, but Mund is a smart guy, as you mentioned, and we also see other people like Terry Smith buying into Nike.

[00:47:57] Daniel Mahncke: It’s not a huge surprise, though. Nike’s size makes it easy for large funds to invest, and the situation seems just appealing to the typical value investor, which brings us to the difference between a portfolio manager and an analyst. You have 20 year gross margin lows, significant revenue declines, rising competition, and a massive decline in the stock price.

[00:48:21] Daniel Mahncke: As an analyst, there are very few short-term data points that could suggest quick improvements. Analysts need to extrapolate what happens today into the future, and they don’t have any numbers that they could twist and turn to fit into a bullish narrative. Right now, as a portfolio manager though, you can buy into a turnaround story based on one of the best known brands in the world, A new beloved management team, short term headwinds, pushing down the stock, and a company with a 60 year long track record of excellence.

[00:48:55] Shawn O’Malley: You could probably say that on this show, we’re somewhere in that middle ground between analysts and portfolio managers. We’re trying to analyze companies in depth and think about what has been happening recently, but we’re also trying to invest with. A very long-term mindset as well. And I think on that spectrum, we probably actually talked a little bit more toward portfolio managers, but so that gives us some leeway to bet on a turnaround story that might take several quarters to unfold.

[00:49:22] Shawn O’Malley: And that’s just not something that Wall Street really has a luxury to be able to do, especially Wall Street analysts if you’re getting judged every quarter and then that’s sort of the, the standard that you work off of. You end up being much more short-term focused. We’ve already mentioned at length though Nike’s short-term headwinds, and a big part of that is Nike’s overstuffed inventories.

[00:49:45] Shawn O’Malley: So can you help the audience better understand how those overs soft inventories are impacting Nike’s business.

[00:49:53] Daniel Mahncke: Inventories turned into a problem for Nike in late 2022. The pandemic caused some serious supply chain issues, especially for a global company like Nike. When those problems eased, several seasons worth of product suddenly arrived at Nike.

[00:50:09] Daniel Mahncke: At the same time. For a company like Nike, access inventory levels are not a good look. They cause costs block new products and they’re difficult to get rid of. Nike had to heavily discounted products, which pressured margins and diluted the brand. That’s why over the last two years, margins have constantly been going down and instead of new products, Nike had to sell Air Forces and Air Jordans just to make space’s.

[00:50:39] Shawn O’Malley: Inventory can kind of blow up the cash flow statement as you’re spinning cash on the inventory. Today, we haven’t been paid for it yet, and the longer it sits, the more working capital you have tied up and the higher those costs are. Efficient inventory management is just so important for any retailer or brand because not only are there the opportunity costs of having capital tied up in idle inventory.

[00:51:03] Shawn O’Malley: If you try to unload it, as you mentioned, you’re going to be selling everything at a discount and you’re hurting your intangible brand value. But just to recap things, we’ve covered Nike’s business, the competition around the brand, the recent market share losses and Elliot Hills initiative to try to in turn things around.

[00:51:23] Shawn O’Malley: How can we pull it all together? And maybe you can help us here by outlining Nike’s valuation and, and how you came up with an intrinsic value target for the company.

[00:51:35] Daniel Mahncke: Usually valuing a company as mature as Nike is relatively straightforward since you have stable margins and a pretty good idea of future growth.

[00:51:45] Daniel Mahncke: Unfortunately, for me, a turnaround stoy like this makes it a bit more tricky. That’s why I would like to begin by zooming out. While most short-term trends would point into the wrong direction, it helps getting some perspective. Nike is still the undisputed market leader. As we mentioned multiple times today, they’re more than double the size of Adidas and they generate twice the free cashflow of Adidas Puma, on and Under Armour combined.

[00:52:13] Daniel Mahncke: When I say this, my goal is not to make the two big to fail argument, but after all the bad numbers, I want to make sure no one’s leaving today’s episode feeling this company won’t be around much longer. Now, the investment case is based on whether Nike sales and margin decline will be short term or longer term, and eventually potentially even get worse.

[00:52:37] Daniel Mahncke: The second consideration is whether Nike’s current stock price reflects a potential rebound off the market is still pricing in more downside. The forward pe, which tells you what investors are willing to pay for next year’s earnings stands at 38, which is a pretty high multiple. For context, Adidas trades at a forward PE of 29, and since I’ve made an Apple comparison before, Apple trades at 29 as well.

[00:53:04] Daniel Mahncke: And many people even consider Adidas to be priced pretty high at the moment. This alone would suggest another 25% downside potential. And don’t get me wrong, this approach is massively simplified, but it just shows you that Nike is still expensive, at least on paper. And that’s the case because analysts expect Nike’s earnings to decline by up to 50%.

[00:53:27] Daniel Mahncke: And at the same time, investors are still willing to give Nike the benefit of the doubt just because of its strong brand and its historic success. And if Nike can stabilize and which just last year’s earnings, the current PE has actually closer to the low twenties. Which for a brand like Nike is a pretty good deal.

[00:53:48] Daniel Mahncke: A major part of the success will be Elliot Hood’s Win Now strategy, or as we said, maybe win later strategy. While it puts pressure on sales and margins in the short one, I personally believe it’s the right strategy for Nike in the long term. He’s quickly getting rid of access inventory, and yes, that will result in 45% gross margin declines in the next quarter, but it’s the only option.

[00:54:17] Daniel Mahncke: Nike has to become more agile again, and Q4 should be the peak of sale and margin declines. Then we will see if Nike just suffered from a perfect storm of unfavorable internal and external factors, or if Nike’s brand has been permanently damaged.

[00:54:38] Shawn O’Malley: I know you can be very skeptical about. Companies can actually do relative to what they promised to do, Daniel, and in this case, you have a company that’s sort of being a skeptic of itself in the short term by delivering some painful news to the market.

[00:54:50] Shawn O’Malley: And yet, you know, as well as anyone, how powerful a strong brand like Nike’s can still be.

[00:54:56] Daniel Mahncke: I think Nike’s own perception is quite mixed. They are very honest about the challenges ahead and simultaneously very bullish in the long run. And you just said it, I’m usually a skeptic, but I do have a weakness for strong brands.

[00:55:12] Daniel Mahncke: So I personally buy into Nike’s long-term optimism In my model. I’ve integrated the management’s terrifying outlook in the fiscal year, 2025 numbers, and then afterwards, I assume slow but steady margin and sales growth with my assumptions, it would still take Nike until 2030 just to reach last year’s earnings again.

[00:55:36] Daniel Mahncke: Just saying this should tell you that despite my long-term confidence in Nike, it’s not clouding my judgment on the future prospects. As a little bonus, Nike also has a dividend and a share buyback program in place. Although the dividend is pretty important at this point, so calling it a little bonus might be a bit of an understatement.

[00:55:57] Daniel Mahncke: I account for those for the buybacks by reducing the share count by 2.5% annually, and I hold onto Nike’s history of increasing its dividend, despite the outlook, not by the usual 10%, though I assume 5% growth going forward. After adding the cumulative earnings per share and dividends, we still have to put an exit multiple on it.

[00:56:22] Daniel Mahncke: Since it’s impossible to know how investors will view Nike five years from now, I like to use a range of multiples, and I then assign probabilities to each of them. Having done that and then discounting these values back to the present using a rate of 8%, my smart model would suggest a fair value of $73 per Nike share.

[00:56:46] Daniel Mahncke: And let me immediately follow up with the disclaimer. The shortfall of these models is that they are very sensitive to changes in the assumptions, and that’s why you have the option to download my model and see for yourself how the price target would change with different growth assumptions or exit multiples or a different discount rate.

[00:57:08] Shawn O’Malley: The estimates are just brutal, and that’s always a tough situation to enter into. I always go back to the idea that we don’t have to make any investments at all. We aren’t really obligated to make a decision either way. We can continue to sit on our hands until we see something that is really obviously a great pick.

[00:57:29] Shawn O’Malley: As you know, Daniel, people call that waiting for a fat pitch in investing. If I’m gonna take a swing, I don’t want it to be at a curve ball like Nike, where the situation is so fluid and can change very quickly for the worst, especially when you can only make a few swings. I wanna find the pitch that kind of slips out of the pitcher’s hand slower than they meant to throw it, and it’s coming right down the middle of the plate and it’s just as easy as it gets to hit a home run off of.

[00:57:59] Shawn O’Malley: And unfortunately, I, I don’t think we found any portfolio companies yet that we’ve covered on the show that are quite that obvious of a home run. And you might only find a fat pitch like that once a year or once every two or three years. But still with companies like Airbnb and Alphabet with the huge network effects they have.

[00:58:23] Shawn O’Malley: It just strike me as simpler things to swing on rather than trying to bet on Nike’s turnaround here, which for the record, that is not me saying I’d wanna bet against Nike. That is the opposite of probably what I’m saying. It, it, it’s sort of like Hershey, in 18 months we might be thinking, wow, we really missed out on a chance to buy a company if the stock prices go up 50% from here.

[00:58:46] Shawn O’Malley: Especially since these are companies are clearly not going outta style and are relatively beaten down share prices at least compared to their own trading history. I actually think that’s a, a pretty good chance that that will be the case with both of those companies. But I just don’t know. I don’t have any conviction or confidence in that.

[00:59:05] Shawn O’Malley: Personally, I only used to wear Nike as a teenager and besides my socks, I don’t think I’ve intentionally worn anything from Nike in years. I’d, I’d almost be embarrassed to do so because it doesn’t feel fashionable. The same way I, I almost feel like I’ve outgrown the brand as a adult now, and I venture to say the same is true for many of my friends.

[00:59:28] Shawn O’Malley: Nike just doesn’t feel as cool or as relevant as it used to when I was maybe 12 years old. And behind that, not just ’cause of the fact that I’ve gotten older, I worry there are more structural issues at hand with Nike around risk taking and innovation and product development that have made it less relevant.

[00:59:47] Shawn O’Malley: And if that’s true, who knows how low the floor is over the intermediate term before the business bottoms out. It could be much lower than we think. I’d imagine that their brand could deteriorate much more significantly than it has. And once it happens, it’s a very slippery slope that’s hard to reverse.

[01:00:05] Shawn O’Malley: And yet, to the question of whether Nike has a moat, they’ve continued to enjoy very positive excess returns in the last five years. Their returns on invested capital, including goodwill. Have been 36%. So to me that is evidence of some kind of moat. It, it, it is in the numbers there. And, and even a wide moat at that, that gives them substantial room for error.

[01:00:29] Shawn O’Malley: And clearly they’ve made a lot of errors, as we’ve talked about today. They’ve made a lot of errors. But when you have substantial competitive advantages, you can also bounce back more clearly. So, I don’t know. I’m torn. I don’t feel strongly either way. But if I can, I, I’d like to just defer to your judgment here, Daniel, and hear what you have to say to wrap it up here.

[01:00:48] Daniel Mahncke: You know, it’s interesting because I see it as an advantage that you come from the states and I come from Germany or maybe get a European perspective on it, because I feel like it’s different here in Germany or perhaps just my disconnect to the fashion world. But I don’t see Nike’s brand as heavily damaged as you do.

[01:01:08] Daniel Mahncke: I think the arts that Nike will be a stronger company five years from now are pretty good. And, and fashion moves fast. Perhaps Nike is out of fashion today, but one or two good releases and they will be back on top. And if there’s a company that has the resources to put it into innovation, into marketing and all of that, to create this hype around the shoe, it’s Nike.

[01:01:35] Daniel Mahncke: And still the stock is very close to its fair value, and we already know that the next quarter will be peak pessimism, and that just makes it difficult to justify starting a position. Now, I’ve brought up Buffet’s comments about Nike because it beautifully shows the approach that made him the greatest investor of all time.

[01:01:56] Daniel Mahncke: You could easily say that he missed Nike because he didn’t understand it. I think that would be a mistake because Buffett understands companies way, way better than any of us, but he understands the power of waiting for the right pitch. Just as you mentioned. Even better. While Nike had good chances for success back then, it wasn’t an obvious pitch.

[01:02:18] Daniel Mahncke: I think the same is still true today. I believe in Nike’s long-term potential, but it doesn’t strike me as a no-brainer at these prices. If we see prices below $60 and the underlying trends improve, that’s very important here. I think the odds change in favor for a Nike investment, but I know that’s not a hot take.

[01:02:40] Daniel Mahncke: That’s pretty much what everyone is waiting for in the market, and if you just think what everyone else is thinking, that’s probably not the best base to make an investment on. I will still be watching the next earnings release closely, and I will update my model accordingly. And perhaps we see Nike at lower prices with a better underlying trend and it does become more attractive than it is today.

[01:03:03] Daniel Mahncke: Now, Shawn, we got some listeners feedback about our teasers for the next episodes. It seems people like the idea and they actually try to figure it out. So I would ask you to think of maybe three hints to give to listeners who want to guess the next one. And please let us know your guesses in the comments.

[01:03:23] Shawn O’Malley: I gave one earlier, and that is that Ackman is an investor in the company, so that’s one.

[01:03:30] Shawn O’Malley: Secondly, maybe I’d add that it’s a company involved in logistics, and thirdly, the big risk we’ll discuss with them is about disruption from ai. So I’ll leave it there, but I’ll be curious if people can guess it right.

[01:03:45] Daniel Mahncke: Alright, let’s close it with a quote by Nike’s face of the turnaround, Elliot Hill. I thrive in challenging times.

[01:03:53] Daniel Mahncke: That’s part of why I love sports and business and why I think the combination of the two is so powerful because you don’t always win. And when we are not winning, it’s how we react. That truly defines us. With that said, see you in the next episode. Have a great day.