Why We Often Talk Nike:  I live in this world. I’ve got four kids who all play sports. I run a big high school basketball shootout - with that you notice quickly which brands are hot… and as an advisor and a strategist, Nike’s a company I’ve followed for years. Clients own it, I own it personally, I’ve previewed it on multiple networks before. With that being said, this quarter feels like one of the most important in a long time. We know there’s undeniable loyalty to the brand, but investors really want to see if the turnaround is real. We think it is, and we think it has legs - here’s why… Turnaround Plan: This is one of the most aggressive resets in Nike’s history, and the plan is starting to take hold. Nike’s problems didn’t happen overnight. Early COVID They leaned too much on lifestyle and digital, pulled back from wholesale, and let inventories pile up. So to get through it they had to slash prices and it hurt margins, strained partnerships, and drifted them away from their core in sports - running / basketball. Elliott Hill, in his first year as CEO, has been trying to fix that. The plan is simple and they’re actively working it: cleaning up inventories, getting back to performance and innovation, rebuilding wholesale. Since October, they’ve turned over nearly a dozen senior roles…one of the biggest shake-ups in company history. Pun intended - they’re shifting to run leaner so they don’t repeat old mistakes. Why this Quarter is Important: Last quarter gave a glimmer of stability that this is working and the stock popped, but with tariffs squeezing margins, choppy spending, and valuation creeping higher, this is the quarter that has to deliver and they’re starting to show signs of life - we’ll see if the plan is finally clicking AND Nike can work through the tariff noise at the same time. What We’re Looking For: What I’ll be watching now are three big things: management of tariff pressure, inventories staying balanced and that margins are holding up, and whether wholesale is seeing healthier sell-through. Revenue will still be down - the Street knows that. What matters is proof the turnaround is gaining traction with some tangible evidence. Tariffs: Tariffs are still the biggest headache. They’ll be about a $1 billion hit this year, with around 16% of U.S. imports still coming from China. The goal is to cut that to single digits by 2026. In the meantime, Hill’s raising prices, cutting costs (announced recent layoffs) and leaning on partners to absorb some of the costs. And you can see it, revenue was down double digits last quarter, but margins didn’t collapse. Inventories: Last quarter really told the story: revenue came down about 12% year-over-year. Nike Direct sales fell 14%, with digital down a steep 26%, but their own stores actually ticked up about 2%. Wholesale was down about 9%. So the top line is still weak…but better than many feared. Margins are under pressure but here’s the key: inventories held flat at roughly $7.5 billion. For Nike, that’s absolutely critical because it means supply and demand are back in balance. That reduces the fire-sale discounting that crushed margins a couple years ago. Wholesale: One of the biggest shifts we’re seeing is Nike leaning back into wholesale. For a while they pulled back too much, but now they’re rebuilding those ties. Foot Locker’s even put Nike’s running lines back in prime spots in their stores, and with Dick’s Sporting Goods buying Foot Locker, that relationship gets even more important. Together those two account for roughly $5 billion in Nike sales. The real takeaway is pretty simple: stronger wholesale means cleaner inventory, less discounting, and better sell-through. If we see that progress show up in this report, it’s a strong sign the turnaround is starting to take hold a key point what they’re trying to accomplish. Skims: Nike’s launching its new NikeSKIMS line with Kim Kardashian, part of a push to win back female shoppers. It’s a flashy move and may help refresh the image, but with limited rollout and stiff competition from Lululemon, the near-term impact looks modest and it’s too early to quantify. Why we like NKE: We’re not in this for a quick trade, but I think you’ll see a strong reaction one way or another from earnings and it’s tilted toward the positive. We like Nike as a longer-term entry point. The bar’s low, and even modest improvement can shift sentiment. Last quarter, the stock popped just for stepping over a very low hurdle, and if we see more progress this time, that’s the kind of setup where it makes sense to step in. Bottom line - long term, you’re still talking about a company with 27% of the global footwear market, unmatched scale, and loyalty competitors can’t touch. With wholesale ties improving, inventory more disciplined, and tariff risk being managed,It creates the kind of backdrop where the upside starts to outweigh the risk.

Markets Are Up - Even If the Headlines Don’t Feel That Way It’s been really easy to miss since it happened so fast, but our job is to keep you in the loop. Over the last few months, the U.S. stock market demonstrated remarkable resilience as it rebounded sharply from the tariff driven lows in April to setting fresh record highs for the S&P 500 the last few trading days. Climbing more than 20% from its recent bottom, the rally has surprised many investors and once again highlighted the market's ability to recover, even when there is plenty in the news to give you pause. While markets can be prone to irrational swings in the short run, over time, they often reflect broader economic trends. Right now, investors seem to be looking past daily headlines and focusing instead on longer-term drivers: the AI transformation, central bank support, gradual progress on trade, and a generally stable global economic outlook. So far, the only formal trade agreement signed this year has been with the U.K., one of America’s strongest allies. An important step, but a limited one. With the broader trade picture still evolving and a July 9th tariff deadline hanging in the background, trade policy remains a wildcard that could reintroduce volatility. On top of that, economic data is mixed. First-quarter GDP showed contraction, consumer spending has been uneven, and the federal deficit continues to grow. Moody’s recent downgrade of U.S. government debt added to the concern, raising the potential for higher borrowing costs for US taxpayers. Additionally, tensions in the Middle East, particularly the escalation between Israel and Iran, create more geopolitical risk. Still, investors have largely stayed the course. Bond markets, unlike in 2022, are doing their part to stabilize portfolios. International equities have awakened from their decade-long slumber and are showing signs of leadership, suggesting that investors are beginning to look more globally for opportunities. As we all know, markets don’t move in a straight line, and plenty of risks remain. But this recent rally is a useful reminder: staying invested, especially during periods of uncertainty, often proves to be the right call. Maintaining a long-term perspective, diversifying across asset classes, and resisting the urge to react emotionally remain cornerstones of investing. Stay invested, even when it doesn’t “feel good” in the moment. Here's why... If you invested $10,000 in the S&P 500 from 2005 to 2024, you would’ve returned over 10% per year. But if you missed the best 10 days, your return would have averaged 6.1% annually. Six of the seven best days for the S&P 500, over that 20-year period, occurred after one of the worst 10 days. That is truly the power of staying invested. As always, if you have questions or concerns about your individual situation, please don’t hesitate to contact us.

Below is a link to a recent BBC article - that we had the honor of being interviewed for - with commentary from us on what the tariffs could mean to Nike and the footwear industry: BBC - Nike and Tariffs