NIKE, Inc. (NKE) on Q3 2021 Results - Earnings Call Transcript
Operator: Good afternoon, everyone and welcome to NIKE, Inc.’s Fiscal 2021 Third Quarter Conference Call. For those who want to reference today’s press release, you will find it at investors.nike.com. Leading today’s call is Andy Muir, VP, Investor Relations. Before I turn the call over to Ms. Muir, let me remind you that participants on this call will make forward-looking statements based on current expectations and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in the reports filed with the SEC, including the annual report filed on Form 10-K. Some forward-looking statements may concern expectations of future revenue growth or gross margin. Andy Muir: Thank you, operator. Hello, everyone and thank you for joining us today to discuss NIKE, Inc.’s fiscal 2021 third quarter results. As the operator indicated, participants on today’s call may discuss non-GAAP financial measures. You will find the appropriate reconciliations in our press release, which was issued about an hour ago or at our website, investors.nike.com. Joining us on today’s call will be NIKE, Inc. President and CEO, John Donahoe and our Chief Financial Officer, Matt Friend. Following their prepared remarks, we will take your questions. We would like to allow as many of you to ask questions as possible in our allotted time. So we would appreciate you limiting your initial questions to one. In the event, you have additional questions that are not covered by others, please feel free to re-queue and we will do our best to come back to you. Thanks for your cooperation on this. I will now turn the call over to NIKE, Inc. President and CEO, John Donahoe. John Donahoe: Thank you, Andy and hello to everyone on today’s call. First and foremost, like all companies around the world, we’re pleased by the recent positive news of the vaccine rollout. We remain optimistic though we’re prepared to operate through continued volatility until the virus is fully contained. Our teams have proven their agility to operate through uncertainty while also staying focused on the long term, and we once again demonstrated that agility in Q3. It’s why I wouldn’t trade our position with anyone. The power of NIKE is our consistency and the strength of our global portfolio. Throughout the pandemic, we have stayed focused on our unique advantages, and we’ve been resolute in fueling innovation and our brand is as strong as ever. I am proud of our results this quarter. Q3 saw us continue to deliver consumers new products, new campaigns, the energy from our roster of athletes and more. Our strategy puts the member at the center and keeps us in the lead, and we will continue to drive even further competitive separation. And still, we push our own expectations of ourselves. Last week, we released our 2020 Impact Report and announced our new 2025 Purpose Targets. Our new 5-year purpose targets offer a road map to 2025, outlining clear goals, action plans, and accountability. And for the first time, that accountability now includes linking executive compensation to our Purpose Goals. Matt Friend: Thank you, John and hello to everyone on the call. As we have entered into a new calendar year filled with new opportunities amidst pandemic-related challenges, our focus has not wavered. We continue to position NIKE to win today and over the long term. We are now 1 year into managing through these dynamics and we have met every hurdle with leadership and decisive action. While we are optimistic about the pace of vaccine distribution and how this will enable safe reopening of the global economy in the near future, the effects of the virus continue to create short-term volatility in our business performance. For example, in Q3, disruption in the global supply chain due to container shortages, transportation delays and port congestion has interrupted the flow of inventory supply. The result has been supply shortages relative to continued strong marketplace demand. Operator: Our first question comes from the line of Bob Drbul with Guggenheim Securities. Your line is open. Bob Drbul: Hi, guys. Good afternoon. John Donahoe: Good afternoon, Bob. Bob Drbul: I guess, I was wondering on the inventory, I think the delayed flow of inventory you talked about your confidence in essentially just moving everything into the fourth quarter. Just – can you just give us a little bit more color in terms of – will that be largely into the wholesale where you sort of missed some of the sales? Are you going to move it to more the apps or the online, the SNKRS App and Nike.com app? Just could you give us a little more color around the plans to move that inventory in the fourth quarter? Thanks. John Donahoe: Sure. Well, as I mentioned, we saw an extension of transit times of inventory by up to 3 weeks. And what that means is that across the marketplace, we were anticipating to have more available supply in the third quarter than ultimately what we were able to have to satisfy demand across both the direct side of the business and across our wholesale partners. We’ve now effectively absorbed the longer lead times through our third quarter. And so, we do expect a more consistent flow of inventory in the fourth quarter, recognizing that transit times are elevated versus the prior year, but we expect a more consistent flow of inventory from here. I mentioned, Bob, in my prepared remarks that we continue to see strong demand across the marketplace, and we’re seeing stronger demand. We continue to see stronger demand in differentiated retail, which is our strategic partners, than we’re seeing in undifferentiated retail. And so, we will continue to prioritize inventory for our strategic partners and for NIKE Direct. And when we look at where marketplace inventory is today, it’s down high-double digits versus where it was a year ago. And so, there is strong demand for that inventory across our strategic partners and NIKE Direct, and we continue to – we intend to continue to fulfill that demand in both of those locations. Bob Drbul: Great, great. And if I could just ask a follow-up question, the – so, I recently had a chance to re-watch The Last , and I think the original budget for the Jordans in – was that $4 million or $3 million in year 4, they did $126 million in year 1. I was wondering if you could tell us who was responsible for the budget that year and maybe if you could just give us a little bit more flavor on how different your forecasting is these days? I think that might be quite interesting. Matt Friend: Well, Bob, I’ve been at NIKE for a little over 12 years, and so I might suggest that you go back and re-read . You might be able to figure out who was back there at that point in time who was making those decisions. Bob Drbul: Alright. I’ll do that. Matt Friend: And I sure our forecasting is better than that. John Donahoe: He dreamed big and we delivered. Bob Drbul: Thank you. John Donahoe: Thanks Bob. Operator: Our next question is from Michael Binetti with Credit Suisse. Your line is open. Michael Binetti: Hey, guys. Thanks for taking our questions, and Matt I wanted to ask you, I think you just said that you raised the revenue growth rate for the year. Obviously, that helps to add a lot of confidence to your ability to unlock some of that inventory. But I think you previously described that the SG&A for the year at up-low singles, and now you’re saying up slightly, while you’re raising revenue growth. But you did say there was some reinvestment in demand creation there, too. So I’m trying to put the – just at a high level, the picture together. It seems like there is either much more efficient demand creation going on that we can think about as the model kind of builds back post COVID longer term, or better leverage on the operating overhead expense line. Maybe you could just help us think about why the SG&A is able to stay at a fairly manageable level there while you keep raising the revenue line? Matt Friend: Sure. Well, I should start by saying that as we get into the fourth quarter, the comparisons start to get pretty challenging as you look year-over-year. The comparisons aren’t going to be linear as compared to where we’ve been in prior quarters, nor will they be intuitive. But when I talk about investment levels, I need to start with the core principle, which is NIKE is a growth company. And so as we continue to see the market opportunity in front of us, we are poised and in this position of strength to be able to accelerate investment against the things that are most critical in order to enable and drive our consumer direct acceleration strategy. Now in the middle of COVID, we got extremely focused on what matters most and we reallocated resources and tightly – and from a disciplined perspective, managed our expenses so that we could continue investing against the things that matter most to our strategy, like our tech – end-to-end tech transformation, digitizing our supply chain, and ultimately investing in the marketplace. And so, we’ve continued to do that while we’ve been able to manage other expenses more tightly as a result of the environment we’re in. As we start to look at coming out of the pandemic, we don’t intend to just add it back in, okay? Every dollar we’re putting back in we know is going to create or we have a plan to create a return on it. And so, we’re taking advantage of the moment to be able to do that, and we will continue to accelerate investment against those levels. But to your point, historically prior to COVID, we were at about 33% of revenue in terms of our SG&A levels, and we’ve been able to manage through the last – the first three quarters of this year closer to 29%, and demand creation has been a source of leverage over this period. The reduction in sport activity in the first half of this year as well as some work that we did to sharpen certain areas of historical marketing investment, and as a result of that, demand creation investment was driving some leverage for us. Prior to COVID, we were at something like 9% or 10% of revenue, and it fell to about 7% in the first half. But what I mentioned on the last earnings call is that we don’t think these are sustainable levels for demand creation as we look forward. And so, given the speed of our recovery in the first half, our plan was to start accelerating investment back towards pre-pandemic levels. We won’t get there in one quarter. We will get there over a period of time, but we believe that that’s the right thing to do from a position of strength and given the size and scale of our brand and our recovery. So we had planned to spend more in the third quarter. But when we started to see the supply chain shifts occurring, we decided to shift some of that marketing investment into the fourth quarter in order to be able to balance and have those marketing investments occur at the time that the product was available in the marketplace. We’re going to be accelerating investment in Q4 against our biggest growth opportunities. Women’s, we’re going to continue to be investing internationally, as I mentioned, against – we’re going to be investing behind Jordan. And we are going to continue to invest against digital. But we do believe longer term, Michael, that digital will be a source of leverage for us as we drive a greater return on ad spend and see more effectiveness in our full funnel marketing. And so that will be a source of leverage over time. Michael Binetti: Okay. Thanks for that. And then John, if I could ask one follow-up, you speak about the physical store strategy globally. It sounds like there is a lot of new interesting concepts. And I guess in North America, a market that grew up long ago is more of a wholesale model, and you’ve made the biggest effort to transform the marketplace there. If the – I’m curious how you see the segmentation effort as a lot of undifferentiated retailers come out of your business, but you still do have strategic partners through – with stores through the U.S. In the past, we’ve seen you segment by House of Hoops, Track Club, the big installations at Dick’s Sporting Goods, those kinds of things. How do you think about the next round of segmenting the market when, if you’re going to be bringing more NIKE brand stores into the market now in a backdrop that has some of those wholesale partners still out there that are generating good business? John Donahoe: Well, Michael, we start with the consumer, we start in every case with the consumer, and the consumer is really clear that they want to get what they want, when they want it, how they want it. And they want a seamless, premium digital and physical experience. In fact, in many cases, they don’t see a difference between digital and physical, whether they bought it on digitally and had it delivered at home or whether they bought it digitally and picked it up in store, whether it was one of our stores or one of our strategic partner stores. And so we do see a need and a really important role for strategic physical presence, both ours and our partners. And the way we’ll go forward is we are driving, starting with our own digital and our own stores, the seamless premium experience that’s centered on the member, where we know who the member is. That member expects us to know who they are, whether they are in our stores or our partner stores. And so we’ll work with a smaller number of strategic partners that see the same future we do and that want to and are willing to share membership data so that we can together deliver a very seamless experience, a very personalized experience for consumers. And the whole One Nike Marketplace will allow us to help consumers to get what they want, when they want it, how they want it. And so as we segment, it’s – we’re leaning in with those partners that see the world the same way we do. And those are the ones and the good news is they do. And the good news is those are the partners that have the most robust business with our shared consumers today. So the consolidation will continue. And again, I think you’ll see even more movement from undifferentiated retail into a smaller number of – a smaller number of partners and our own stores that provide that seamless premium experience. Michael Binetti: Thanks a lot, John. Operator: Our next question is from Erinn Murphy with Piper Sandler. Your line is open. Erinn Murphy: Great, thanks. Good afternoon. John, for you, I was hoping you could speak a little bit more about the strength you’ve seen in China, maybe a little bit on the consumer behavior as well as the product trends as that economy has picked up. Is there anything that you’re looking or that you can learn from what you’re seeing there for the rest of the world as we all open up? And then Matt, just for you, a clarification, would you be able to quantify kind of what you think the port miss was on North American segment in the quarter? Thank you. John Donahoe: Well, Erinn, on China, it’s just really clear, and it’s sort of interesting. I’m on my, I guess, 14 month, but I so distinctly remember and fondly recall, my first week at NIKE was in China, as you recall, on the streets of Shanghai and Beijing, seeing the incredible connection that the Chinese consumer has with the NIKE, Jordan and Converse brands and frankly, seeing really high-quality physical retail to my prior – to the prior question, prior answer. The merchandising – these are all mono-brand stores, as you know, with us, our direct ones and our partners. And when you see what a outstanding physical merchandise experience can be and link that to a seamless digital experience, it’s quite powerful. And we’re probably furthest along in the world on that in China. And I will say that our Chinese team has just done a fabulous job in the past year of not just building a great business, but showing the way for other parts of the company. They obviously have done that through the pandemic being constantly 3 to 6 months ahead. Including today, being back at work side-by-side and the energy that comes with that, including today having physical retail open and seeing traffic getting close to historical levels. But they are also leading on that seamless experience. An example I’ll highlight is just the one, I think Matt mentioned this in his remarks, on our new doors there, they are getting 70%, 80%, 90% of consumers in physical doors to either identify themselves as members or sign up and become members. And that allows that seamless experience for a consumer. So they are not – they are completely indifferent about whether they buy it, have it shipped to home, buy it online and pick it up in the store, whether within the store and they buy it and have it shipped home. And so I think that strong connection we have with consumers, brand-wise, but also that when we talk about the consistent premium, seamless experience, online to offline, that deliver consumers, we’re furthest along. We’re furthest along in China, and I give that team huge credit, and we’re rapidly following that in our other geographies and regions. Matt Friend: I’d maybe just jump in and say on the China piece that we continue to scale the Express Lane in China. And I referenced a couple of examples in the quarter related to Chinese New Year specific product. But we doubled the Express Lane in the quarter, and it continues to have significant impact, not only on localizing product but also – localizing product, but also speed and agility in the marketplace through our fulfillment models. And then Erinn, maybe one other indication vis-à-vis China being ahead of other places, as the world has opened up, sport is returning. And so just the energy that we’re seeing with sport returning, we’re seeing our Performance business continue to grow significantly as well as our Kids business in that market, and it gives us a lot of optimism as we’re looking ahead to reopening occurring in North America, Europe and other places. Specifically on your question about North America, what I would just say is we were on track to deliver our internal plans, and we were seeing momentum that was consistent with the type of momentum that we’ve been seeing year-to-date as we are shifting, creating the marketplace shifts and continuing to lead with NIKE Direct and our strategic partners. Operator: Our next question is from Omar Saad with Evercore ISI. Your line is open. Omar Saad: Good afternoon. Thanks for taking my question. Hey, John, I wanted to follow-up on an interesting comment you made about merging art and science. And when you were talking about putting the data people alongside the creative people, maybe you could dive into that a little bit more. What your vision is and what areas are you applying data? Is it just customer analytics or is it in design and marketing and other areas? We’d be really curious to see how you’re doing that. And then my follow-up question is around women’s. It kind of seems like a recurring theme. You guys are doing really well in a lot of areas in the women’s business. What are the key drivers? What’s the difference from the past? NIKE has been focused on women’s a long time, but it seems to be inflecting. And maybe if you could update us on where women’s is in the mix and how big that maybe that could be over time? Thanks. John Donahoe: Great, Omar. And Matt, why don’t I take a cut of these and you can fill in. On – Omar, on data, data will ultimately improve our ability to deliver great experiences throughout our value chain. Now the most obvious place is at the consumer-facing front, right? So even in this quarter, we saw use of data to deliver more targeted communications to consumers and more personalized experience. And I would say, relative to what’s possible, we’re just scratching the surface there. So on that sort of consumer-facing side, data played a really – has played an important role and will continue to play an important role. The second area it plays an important role is one part of the consumer experience was getting the right product in the right place at the right time. And so this is where our select acquisition has allowed us to fairly impressively pivot to a more direct-to-consumer supply chain. And I, again, give our supply chain team enormous credit for what they have done over the last year as we have pivoted toward digital. But what that’s all about is knowing what inventory to have resident in local regional warehouses so that you can get delivered more rapidly and often through ground transportation. By the way, both of those are scale games. The more data you have, if you’re the leader and you have more scale, it allows you to deliver better experiences and have better efficiency. And as you described, data will ultimately also be able to help us do better design and create better products. Some of the people that are most excited in the company about what data and technology can do are John Hoke, our – who runs design, and Phil McCartney and Aaron Heiser, who run footwear and apparel. They are like with the data that we now have from our digital sites and that we can get from our consumer insights group, it just means that we can design footwear and apparel that’s even more focused and more targeted on what the consumer wants. And so I’d say we’re into our data journey, but there is so much more opportunity to come. And I think the entire company sees it and is excited about it. With respect to women’s, the women’s business is having a great momentum. It was the – I think eighth straight quarter where women’s growth out indexed overall growth. And that’s across both NIKE and Jordan Brand. And that had 86% growth in NIKE Digital. And physical retail, marketplace retail, grew to high double digits, and we’re gaining share in women’s, both on footwear and apparel. And while we’re seeing success in women’s to date, this move toward the consumer construct that we’ve described with a real dedicated and focused women’s team, means that we can increase our investment. So we’ve doubled our investment in women’s innovation over the past year, and that extends end-to-end. And so a wonderful example of what that can produce is what I referred to earlier, this React Escape. Because we launched it this quarter, this running shoe takes into account the physiological differences between male and female bodies. And so its silhouette, its materials, its design details are all aimed at the new female runner. And we think it’s just a wonderful example of how we can take sharper insights and a greater focus end-to-end across our organization to really continue to turbocharge our women’s business. Matt Friend: I would just add that some of the comments John made earlier as well just about our store strategy, the Nike Live concept is a is a concept that’s intended to unlock significant growth in the women’s marketplace. And we just – it would be hard, Omar, to size the opportunity because the women’s market is so large. And we see the opportunity relative to where our business is penetrated today. And so while we continue to take share, those definitions are within the refinement of the way people define the market from an athletic footwear and athletic apparel in this. But what we’re also seeing is athletic taking share of the broader women’s marketplace. And so those are going to be fuel for growth for us as we continue to invest behind this exciting opportunity. Andy Muir: Operator, we have time for one more question. Operator: Our last question comes from Jamie Merriman with Bernstein. Your line is open. Jamie Merriman: Thanks so much. John, I think we’ve talked on several calls about the investment in data and even on this one. And so I was just wondering if you could talk a little bit more about the Datalogue acquisition? And then I think, Matt, on prior calls has talked about the margin advantage of digital. But it seems to me that there is some real P&L benefits from the scaling of data. So if you kind of had to dream the dream, what do you think the opportunity is there? Thank you. John Donahoe: Well, Matt, maybe I’ll dream the dream around the consumer, and you can dream the dream around our income statement. I think they are very linked. Jamie, it’s – I had to say we’re just scratching the surface. I mean, so yes, Datalogue is our fourth data and analytics acquisition over the past couple of years. And they use machine learning to help automate, translating raw data into critical and actionable insights and doing it real-time at enterprise scale. And so as I said earlier, you’re beginning to see whether it’s improved and personalized search results, whether you’re seeing more personalized recommendations of what if you bought this, you should buy this, if it’s anticipating timing of when you’re due for potentially some new footwear or some new apparel. Data just allows us to have a more personalized experience with consumers, and it’s what consumers want and expect from a brand like NIKE, There are an awful lot of brands out there or platforms where they don’t want people, they don’t want people to know them well. NIKE is a brand and Jordan, where consumers want us to know them well and offer that even better experience. And then as you said and as I said a minute ago, almost across every step of our value chain, data enables us to, one, deliver the right product, right place, right time to that consumer. As I described earlier, and two, it drives efficiency and productivity. But our focus will be on the consumer. And that’s one of the things that I think has always been a hallmark of NIKE is the consumer is absolutely at the center. And so we’re going to prioritize that and continue to invest heavily in technology enablement and data. And as you said, scale matters. Scale matters because you get the most actionable data. This is – it’s true in the technology industry. It’s also true, I think, in our industry, and so we’ll have a scale advantage in data. And it will drive both better consumer experience and efficiency. Matt, do you want to comment, add to that? Matt Friend: Yes. So I’ll dream the dream on the financial side of it. We think that, as I’ve said for several quarters in a row, and Andy said before me, that the financial value of data and technology are significant for us. And we’re already starting to see some of it, Jamie, in our current performance, but the opportunity in front of us is significant. It’s being right more of the time. And where you’ll see it drive financial value through our P&L is making better pricing and merchandising decisions, where we place our inventory, how we choose to fulfill demand. All of those things will result in, and we see how a much more scientific and data-driven and machine learning approach to this is taking – is using human judgment with great analytics to enable us to make those decisions. And then I think more broadly as an enterprise, as we continue to automate the way we work and leverage technology end-to-end, there is going to be productivity in the manual processes and work that we do as a company today. And so I think you’ll also see productivity in SG&A over time as a result of us being able to leverage this type of capacity versus working in a more legacy type of fashion. And so we’re investing heavily towards all of those opportunities. John Donahoe: And Matt, I’m going to just maybe add one final comment before we wrap up because I do want to – we’ve had two, three data questions in a row, but as you said, Jamie, art and science. The science, the science of what we are doing, it’s been done, it’s doable. But the thing that makes this company remarkable is the art. It’s the creativity of our apparel designers, of our footwear designers. It’s the creativity of our brand teams and the storytelling they do and so data doesn’t displace art. It’s both. It’s data and technology help enhance it and supplement it. But this – the core of this, the heart and soul of this company is an amazing wellspring of creativity and innovation and the mindset in everything we do. And so I just – this is going to make it a little bit more direct-to-consumer and make it a little bit more efficient. But we will never lose sight of the art of what NIKE, Jordan and Converse do. So, with that, Andy time to wrap up. Andy Muir: Yes. Thank you, Jamie, and thank you, everyone. We appreciate you joining us today, and we look forward to speaking with you next quarter. So take care. Operator: This concludes today’s conference call. You may now disconnect.
Morgan Stanley Trims Nike Price Target as Turnaround Timeline Stretches
Morgan Stanley lowered its price target on Nike (NYSE:NKE) to $61 from $70 while maintaining an Equal Weight rating, citing a lengthening path to recovery amid macroeconomic pressures and underwhelming brand momentum.
The firm noted that recent tariff developments and broader economic conditions are likely to delay Nike’s turnaround efforts. Adding to the cautious outlook, Morgan Stanley reported limited positive feedback from wholesale partners regarding consumer demand or upcoming product innovations. Additionally, the brand’s visibility and momentum—often referred to as "brand heat"—showed no meaningful improvement over the past three months.
Analysts now believe consensus estimates for fiscal 2026 earnings may be too optimistic, and management could be forced to temper expectations of a post–fourth quarter rebound. While Nike’s strategic execution appears to be gaining some initial traction based on wholesale and specialty retail checks, the broader recovery remains both slow and unpredictable.
Complicating the narrative is Nike’s elevated valuation—trading at 32 times earnings versus its pre-COVID average of 24—making it harder for investors to justify a near-term bet on a turnaround. Still, Morgan Stanley acknowledges that expectations are currently low heading into the next earnings report, leaving room for any positive surprises to act as short-term catalysts.
Nike Slumps Over 6% as Weak Q4 Outlook Overshadows Earnings Beat
Nike (NYSE:NKE) shares dropped more than 6% in pre-market today, as a disappointing revenue forecast for the fourth quarter erased initial gains sparked by a stronger-than-expected third-quarter report.
The company reported Q3 earnings per share of $0.54 on revenue of $11.27 billion, beating analyst estimates of $0.29 EPS and $11.02 billion in revenue. The upside was fueled by strong demand for new footwear launches, a bright spot under new CEO Elliott Hill’s early leadership as he works to revitalize the brand.
However, optimism was short-lived after CFO Matthew Friend signaled a mid-teens percentage decline in Q4 sales, steeper than the 12.2% drop expected by analysts. The company also warned that discounting efforts to clear excess inventory could further weigh on fourth-quarter performance.
The update triggered a sharp reversal in sentiment, as investors digested the impact of continued demand softness, especially in key markets. In Q3, overall revenue fell 9%, with North American sales plunging 21% to $1.1 billion, and Greater China revenue dropping a staggering 42% to $421 million.
Despite exceeding profit expectations this quarter, Nike is clearly navigating a challenging retail environment, with regional headwinds and margin pressures clouding its near-term outlook.
Nike Slumps Over 6% as Weak Q4 Outlook Overshadows Earnings Beat
Nike (NYSE:NKE) shares dropped more than 6% in pre-market today, as a disappointing revenue forecast for the fourth quarter erased initial gains sparked by a stronger-than-expected third-quarter report.
The company reported Q3 earnings per share of $0.54 on revenue of $11.27 billion, beating analyst estimates of $0.29 EPS and $11.02 billion in revenue. The upside was fueled by strong demand for new footwear launches, a bright spot under new CEO Elliott Hill’s early leadership as he works to revitalize the brand.
However, optimism was short-lived after CFO Matthew Friend signaled a mid-teens percentage decline in Q4 sales, steeper than the 12.2% drop expected by analysts. The company also warned that discounting efforts to clear excess inventory could further weigh on fourth-quarter performance.
The update triggered a sharp reversal in sentiment, as investors digested the impact of continued demand softness, especially in key markets. In Q3, overall revenue fell 9%, with North American sales plunging 21% to $1.1 billion, and Greater China revenue dropping a staggering 42% to $421 million.
Despite exceeding profit expectations this quarter, Nike is clearly navigating a challenging retail environment, with regional headwinds and margin pressures clouding its near-term outlook.
Nike Upgraded to Overweight as Strategic Marketplace Cleanup Signals Recovery Potential
Piper Sandler analysts upgraded Nike (NYSE:NKE) from Neutral to Overweight, raising the price target on the stock to $90 from $72. The upgrade reflects growing confidence in Nike's recovery trajectory as the company takes decisive steps to address inventory challenges and reposition for future growth.
Under the leadership of CEO Elliott Hill, Nike has accelerated efforts to clean up its marketplace by reclaiming products and offering markdown support to retail partners. These measures aim to streamline inventory and restore a pull-market dynamic, which could lead to a visible turnaround entering fiscal 2026. Despite lingering negativity in buy-side sentiment—evidenced by a significant increase in short interest since September—this proactive approach positions Nike for long-term success, according to the analysts.
The timeline for transitioning back to a pull-market environment, driven by renewed product innovation, remains a central debate among investors. Piper Sandler’s analysis outlines a bottom-up sales scenario in which Nike halves its penetration of classic franchise products and achieves an 80/20 full-price-to-off-price sales mix. This shift could realistically materialize within three quarters, accelerating the company’s path to recovery.
Nike Upgraded to Overweight as Strategic Marketplace Cleanup Signals Recovery Potential
Piper Sandler analysts upgraded Nike (NYSE:NKE) from Neutral to Overweight, raising the price target on the stock to $90 from $72. The upgrade reflects growing confidence in Nike's recovery trajectory as the company takes decisive steps to address inventory challenges and reposition for future growth.
Under the leadership of CEO Elliott Hill, Nike has accelerated efforts to clean up its marketplace by reclaiming products and offering markdown support to retail partners. These measures aim to streamline inventory and restore a pull-market dynamic, which could lead to a visible turnaround entering fiscal 2026. Despite lingering negativity in buy-side sentiment—evidenced by a significant increase in short interest since September—this proactive approach positions Nike for long-term success, according to the analysts.
The timeline for transitioning back to a pull-market environment, driven by renewed product innovation, remains a central debate among investors. Piper Sandler’s analysis outlines a bottom-up sales scenario in which Nike halves its penetration of classic franchise products and achieves an 80/20 full-price-to-off-price sales mix. This shift could realistically materialize within three quarters, accelerating the company’s path to recovery.
Nike Stumbles Despite Beating Q2 Expectations, Shares Slide 7% on Weak Outlook
Nike (NYSE:NKE) shares dropped more than 7% in pre-market today despite exceeding expectations for its fiscal second-quarter earnings. While the company’s initial results impressed, disappointing guidance and updates during the earnings call weighed heavily on investor sentiment.
For the quarter, Nike reported earnings per share of $0.78, surpassing analyst estimates of $0.65. Revenue totaled $12.4 billion, also ahead of the $12.18 billion expected. However, the numbers reflected challenges, with revenue down 8% year-over-year and Nike brand sales declining 7% to $12 billion. Gross margin contracted by 100 basis points to 43.6%, impacted by steeper discounts and shifts in sales channels.
China emerged as a weak spot for the sportswear giant, with sales plummeting 27% to $375 million, underscoring persistent difficulties in one of Nike’s key growth markets.
Looking forward, Nike’s projections for the third and fourth quarters added to concerns. The company expects Q3 revenue to drop by a low double-digit percentage, missing market expectations of an 8% decline. Additionally, it warned of an even steeper revenue decline in the fourth quarter, falling short of the anticipated 6% drop.
Nike Stumbles Despite Beating Q2 Expectations, Shares Slide 7% on Weak Outlook
Nike (NYSE:NKE) shares dropped more than 7% in pre-market today despite exceeding expectations for its fiscal second-quarter earnings. While the company’s initial results impressed, disappointing guidance and updates during the earnings call weighed heavily on investor sentiment.
For the quarter, Nike reported earnings per share of $0.78, surpassing analyst estimates of $0.65. Revenue totaled $12.4 billion, also ahead of the $12.18 billion expected. However, the numbers reflected challenges, with revenue down 8% year-over-year and Nike brand sales declining 7% to $12 billion. Gross margin contracted by 100 basis points to 43.6%, impacted by steeper discounts and shifts in sales channels.
China emerged as a weak spot for the sportswear giant, with sales plummeting 27% to $375 million, underscoring persistent difficulties in one of Nike’s key growth markets.
Looking forward, Nike’s projections for the third and fourth quarters added to concerns. The company expects Q3 revenue to drop by a low double-digit percentage, missing market expectations of an 8% decline. Additionally, it warned of an even steeper revenue decline in the fourth quarter, falling short of the anticipated 6% drop.
