On Monday, Telsey Advisory Group adjusted its outlook on Nike Inc (NYSE:NKE) stock, reducing the sportswear giant's price target to $93 from $96 while retaining an Outperform rating. The firm cited the need for Nike's new CEO, Elliott Hill, who took the helm on October 14, to address the brand's recent underperformance and set a course for future success.
The analyst highlighted several key areas that market observers are keen to see addressed under Hill's leadership. These include the product innovation pipeline with a focus on running, lifestyle, and basketball segments; adjustments in distribution strategy and a potential pivot back to wholesale partners; strategies for managing key franchises and inventory levels; and the expected timeline for these initiatives to produce results.
Nike has faced challenges with weakening demand and an increase in promotional activity to clear excess inventory, particularly in lifestyle franchises like Dunk and Jordan 1. The company has also scaled back on the number of high-profile launches for both Nike and Jordan brands. These efforts are anticipated to extend into the second half of fiscal year 2025 (2HF25) as Nike aims to reset for fiscal year 2026 (FY26).
In the latest earnings call, Nike retracted its fiscal year 2025 guidance, indicating potential shortfalls in near-term consensus estimates from FactSet. Telsey's own forecast for Nike's FY25 earnings per share (EPS) stands at $2.50, below the FactSet consensus of $2.71. Despite recent hurdles, retailers have welcomed Hill's appointment, with CEOs expressing confidence in Hill's long-standing industry relationships and enthusiasm for Nike's innovation pipeline.
At The Running Event conference held in Austin in mid-November, Nike introduced a new strategy to streamline its running shoe offerings, which may reflect one of Hill's early decisions as CEO. The company's efforts to recalibrate its approach and focus on innovation are expected to lay the foundation for Nike's future performance in the competitive sportswear market.
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