NKE

Nike is a premium franchise caught in a self-inflicted reset, and the FY2025 numbers show the damage: revenue fell 9.8% to $46.3B, net income collapsed 43.5% to $3.22B, and diluted EPS dropped to $2.16 (-42.1%). The MD&A confirms this is largely deliberate — management is 'liquidating inventory through increased markdowns across NIKE Direct,' repositioning Digital as a full-price platform, and cutting supply of certain footwear to 'reignite brand momentum.' Those actions crushed profitability: gross margin slipped to 42.7% (from 44.6%), and EBIT margin fell to 8.2% from 12.7% while demand-creation spend rose 9%. ROIC dropped from 34.9% to 20.2% in a single year — a stark measure of how much capital efficiency the reset has cost.

The balance sheet is the reason this is a hold rather than a sell. Equity of $13.2B still supports a 24.4% ROE, current assets ($23.4B) cover current liabilities ($10.6B) 2.2x, and there is no current-portion debt against $7.96B long-term debt and $7.46B cash. The company remains solidly investment-grade and profitable through the trough. The blemish is capital return running ahead of cash generation: operating cash flow halved to $3.70B (FCF ~$3.27B after $430M capex), yet Nike paid $2.30B in dividends and repurchased $2.98B of stock — $5.28B out the door — helping push retained earnings negative (-$727M) and cash down 24%. That pace is not sustainable at trough earnings without further drawing down the balance sheet.