Most people explain Nike’s fall as a valuation story. And yes, that is part of it.
The market stopped paying for perfection. Investors had priced Nike as if growth, margins, execution, and brand strength would all stay close to flawless. Reality showed something else: slower growth, pressure in China, margin compression, channel mistakes, and a recovery that kept getting pushed further out.
So the multiple came down. Fair enough.
But to me, that is only the surface-level explanation.
The deeper problem starts when management drifts away from the DNA that made the company great in the first place. And Nike is not the only example. Adidas went through a version of the same mistake, and I think Amazon may be walking into one too.
When companies break what built them
At a higher level, I think the pattern is actually simple: When companies break with the ecosystems that built them, the market eventually notices, and the price reflects it.
Nike did it by pushing too hard into DTC and weakening long-standing wholesale relationships that had been part of its strength for decades.
Adidas did it differently. It over-concentrated too much of its economic and cultural relevance in one external figure.
Amazon, in my view, may now be doing its own version of it by becoming more willing to weaken parts of the customer-facing culture that made the company so trusted in the first place.
Different companies. Different industries. Same mistake.
Management starts chasing a new narrative, a new channel, a new technology, a new operating model, or a new set of KPIs — and in the process starts drifting away from the foundations that made the business special.
That is when the real damage begins.
Adidas: when relevance is outsourced
Adidas is a very useful example because it shows that this problem is not always about channel strategy.
Sometimes it is about outsourcing too much of your identity.
Yeezy represented roughly €1.5B out of €22B in revenue. But the real issue was not just the revenue contribution. According to analyst estimates at the time, Yeezy accounted for more than 40% of Adidas’ operating profit, while also representing a huge share of its lifestyle relevance and cultural heat.
That is a dangerous level of concentration.
And more importantly, it exposed something deeper: when too much of your culture, relevance, or brand heat sits in a third party, the strategic risk becomes enormous.
Yeezy was a great business. But it was Yeezy, not Adidas.
Yes, the break was more forced than voluntary. That part is true. But the lesson still stands. Adidas had allowed too much of what made the brand feel culturally powerful to live outside the brand itself. That is never a comfortable place to be.
Amazon: a different version of the same red flag
To me, Amazon shows the same warning sign, just in a different form.
Jeff Bezos built Amazon on obsessive customer dedication. Not just logistics. Not just scale. Not just infrastructure. Customer obsession was the core.
That was the soul of the company.
Now it feels like Andy Jassy is becoming more willing to weaken parts of that customer-facing culture in order to optimize margins and pour money into AI.
The problem is not AI.
Investing aggressively in AI may be the right move. It may even be necessary.
The problem is doing that while drifting away from the DNA that made Amazon Amazon in the first place.
That is how strong companies become fragile. Not because they refuse to change, but because they change in ways that disconnect them from the reason customers trusted them to begin with.
Nike: this was not just a channel mistake
Nike’s case is especially interesting because I do not think this was just a sales-channel issue.
I think it was also a brand and identity issue.
Under Donahoe, Nike was managed too much as if it were an e-commerce platform. He came from ServiceNow, and before that eBay, and I think that lens mattered more than people admit.
The mistake was not going digital.
Going digital was inevitable.
The mistake was believing that a channel could replace the distribution culture Nike had spent decades building.
Nike was never just a company moving product through channels. Its strength was always deeper than that: sport-specific segmentation, identity, aspiration, and a very sharp emotional connection between the customer and the brand.
And once that starts to weaken, the damage goes way beyond a spreadsheet.
That is why I keep coming back to a very simple example:
A runner is no longer buying from a running brand. He is just buying sneakers.
That change sounds small, but it is huge.
Because the moment that happens, the customer is no longer relating to the brand through identity, discipline, or belonging. The purchase becomes more generic. Less specific. Less emotional. Less rooted.
And that kind of connection takes years to build and seconds to break.
This is why I think Nike’s problem goes beyond multiple compression.
Even with better execution, even with cleaner inventories, even with a smarter DTC rollout, some sales may still have weakened if the consumer had already started disconnecting from the brand in a deeper way.
Donahoe’s real mistake
To me, Donahoe’s real mistake was not digital transformation itself.
It was acting as if Nike’s old engine could be disrupted too aggressively before the new one had fully proved it could replace it.
Nike pulled the plug on part of the cash flow engine that made the business great in order to chase a channel more aggressively.
That was the issue.
The smarter move would have been to experiment with new channels without weakening the legacy engine before the economics were fully proven.
Because wholesale was not just a distribution method. It was part of Nike’s ecosystem, reach, visibility, and commercial rhythm.
You cannot rip that out quickly and assume the brand will remain untouched.
China, tariffs, and the amplifier effect
Now add China and tariffs to the mix, and the whole thing gets worse.
Nike enters this macro environment with margins already compressed and with the market still pricing in a recovery that has not really materialized.
Macro pressure does not create the weakness.
It amplifies it.
And that is what makes situations like this dangerous. When the structure underneath is already weaker than it looks, external pressure stops being a headwind and starts becoming a stress test.
Why Hill matters
This is also why I think Elliott Hill’s return matters more than many people realize.
Hill grew up inside Nike. He started as an intern in 1988, moved through 19 roles across almost every major function of the business, became President of Consumer & Marketplace, left in 2020, and then came back as CEO.
That matters.
Not because internal executives are automatically better, but because in a case like Nike, recovery is not just about efficiency, process, or turnaround frameworks.
It is about memory.
Hill knows the DNA. He knows the culture. He knows the structure that made Nike what it is.
And in a company like this, that may matter more than any polished turnaround playbook.
The real lesson
The usual lesson from Nike is that paying for perfection is dangerous. I agree.
But I think the deeper lesson is harsher than that.
Paying for a promise of perfection that never gets delivered is one thing.
Paying for that promise while management is also forgetting the roots that made the business great is something else entirely.
That is when even the strongest brands start becoming fragile. Because in the end, markets can forgive slower growth for a while.
What they do not forgive for long is a company forgetting what it is.
🟢 Disclosure: The author holds a position or has active interest in this name.
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