Nike Is Still In Turnaround Mode, But Analysts See the Light at the End of the Tunnel

Analysts are cautiously optimistic about Nike ahead of the brand’s second quarter earnings report on Thursday.

Nike, which has been helmed by company veteran Elliott Hill since October, has implemented a deep promotional strategy to manage higher levels of inventory that have accumulated as a result of slower than expected retail sales. Nike also set out to reduce the presence of its popular franchises, such as the Air Force 1, Air Jordan 1 and Dunk, to reset demand for these key franchises.

These measures are part of a broader turnaround plan, helmed by Hill, designed to get Nike back on track after several quarters of falling sales and criticism regarding lack of innovation. It is still early on in the process, but analysts are overall upbeat about the Swoosh’s potential for growth in the long term.

According to Williams Trading analyst Sam Poser, Nike’s current promotional actions will likely translate into sluggish Q2 sales results. But the overarching benefits to brand health will likely ultimately pay off.

“Mr. Hill has cut the bandage off, which will quickly create a base for the business,” Poser said in a Dec. 11 note to investors. “We expect an aggressive promotional stance will remain in place through Q3 and begin to moderate in Q4.”

Stifel analyst Jim Duffy had a similar view, describing fiscal year of 2025 as a “transition year” for the company. While Duffy gave the stock a “hold” rating, he remained positive about the potential for a broader turnaround under Hill.

“We expect Mr. Hill is upbeat and bullish about long-term potential for the Nike and Jordan brands but forthright about near-term challenges,” Duffy wrote in a note to investors last week. “We are encouraged to see a Nike insider in the CEO role but Nike remains in reset mode and we expect it will take time to revitalize company culture and ultimately reinvigorate brand momentum.”

Hill’s turnaround hinges on several key elements including a reinvigorated innovation pipeline, an improved company culture and, perhaps most notably, a new wholesale strategy. After exiting several retail partners in 2021, Nike has started to lean back into these relationships and recently elevated Tom Peddie to the role of vice president, general manager of North America to oversee this business unit.

Several key Nike partners are already picking up on these changes. In the last few weeks, Foot Locker, Academy Sports + Outdoors, Designer Brands Inc. and JD Sports have all called out the Swoosh during calls with analysts discussing their most recent earnings results. In many cases, the chains lauded their Nike relationships and said they were looking to increase the amount of product they receive from the brand moving forward.

“We believe Hill along with VP/GM of North America Tom Peddie are the right leaders to drive a marketplace recovery,” said Baird analyst Jonathan Komp in a note to investors last week. “And any signs of positive reception to newer product introductions can reinforce confidence in brand fundamentals over the next several quarters.”