Why Nike Partnering with Costco Is Actually a Genius Move

Nike (NYSE: NKE) is in turnaround mode after years of missteps. One self-inflicted wound was the company's decision to flood retail channels with its Classics franchises to boost growth. While Classics sales increased, Nike largely abandoned the concept of using scarcity to build hype, weakening the brand in the process.

Under CEO Elliott Hill, Nike is getting back to its premium roots. Promotions are being cut down, scarcity is back in vogue, and the Classics franchises are being right-sized. The company plans to reduce Classics sales by more than $4 billion by the end of fiscal 2026. To rebuild the brand and return to growth, Nike must shrink some of its most popular franchises.

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Using scarcity to create hype

One development in the past month demonstrates what the new Nike might look like. Teaming up with Costco, Nike quietly launched the Kirkland Signature x Nike SB Dunk Low on Jan. 30, reportedly at just 8 Costco locations. The shoes sold for $135 at Costco locations, but resale values spiked. On StockX, prices have consistently been over $400 since launch.

The Kirkland Signature x Nike SB Dunk Low is an ode to the Costco experience. Featuring gray material similar to Costco's popular hoodie and sweatpants, the shoes include a tag that looks like a Costco membership card and a hidden reference to Costco's iconic $1.50 hot dog under the insoles. The shoes were a hit on social media.

It's unclear whether Nike and Costco plan to expand this partnership and bring the shoes to more locations. However, this extremely limited launch is a demonstration of the hype that Nike can still create around its footwear.

A taste of Nike's long-term potential

While the Costco collaboration won't meaningfully boost Nike's sales unless its scope is greatly expanded, the launch provided a showcase for Nike's strategic use of scarcity to get people talking and drive excitement around the brand.

Nike's overall revenue grew by just 1% in the second quarter of fiscal 2026, but signs of a comeback are starting to emerge. The North America wholesale business saw revenue rise by 20% year over year, indicating that retail partners are reengaging with Nike following the end of the company's misguided digital-first strategy.

Shares of Nike are down significantly over the past 5 years, and as Hill noted during the latest earnings call, the company's comeback won't be a straight line. But for long-term investors, Nike's Costco partnership is a positive sign that the company is finding its footing and building the foundation for a successful turnaround.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Nike. The Motley Fool has a disclosure policy.