Needham & Co. downgraded Nike’s shares due to sluggish progress on its turnaround while adding VF Corp. to its conviction list on expectations of a strong holiday quarter for The North Face and Timberland. Deckers was removed from Needham’s conviction list due to projected continued slowing growth at Hoka and Ugg.
Tom Nikic, Needham’s lead analyst in the space, also upgraded Steve Madden to “Buy,” as he believes the company is benefiting from current fashion trends, and raised his price target on Ralph Lauren, also due to expectations for a robust holiday quarter, in an overall reassessment of his coverage.
Broadly, Nikic noted that after a “tough” 2025 that saw his coverage of apparel and footwear issues decline 15 percent on average versus a 16 percent gain in the S&P 500, he noted, “There’s reason for hope in 2026: a resilient consumer, hopefully no more tariffs (and a potential refund of already-paid tariffs), and various margin tailwinds (pricing, FX, etc.)”
In downgrading Nike to “Hold,” Nikic noted that while CEO Elliott Hill is “doing the right things for the brand long-term,” including refocusing on sports and reengaging wholesale partners, the turnaround is taking longer than expected, and visibility into its timing remains low.
He also said one “potential strategic misstep” is the aggressive sell-in to the North America wholesale channel, where sales grew 24 percent in the most recent quarter and 11 percent in the prior quarter. He wrote, “We are concerned that this could cause near-term challenges, as we don’t believe that ‘brand heat’ is at levels that support that level of sell-in (and at the very least, it results in difficult compares later this calendar year).”
Nikic said challenges in China and the Converse brand “appear very intense,” with the timeline for those businesses to recover uncertain. Also, while Nike appears on a “path to recovering the earnings they’ve lost the last few years,” current consensus estimates are “too aggressive on the pace of recovery,” he contended. Shares have also been bid up recently due to purchases by Hill and board member and Apple CEO Tim Cook, shrinking the upside potential for the stock versus Needham’s prior price target.
Nikic wrote, “Thus, taking all this into account, we are stepping to the sidelines pending greater clarity around the turnaround.”
Needham also withdrew its price target on Nike. Its previous price target was $68. Shares of Nike closed Thursday at $65.26, up $2.04.
In adding VF to Needham’s conviction list and raising its price target to $25 from $21, Nikic noted that his team’s holiday checks suggest “strong demand” for The North Face and Timberland, which he said is particularly important because both earnings for both “cold weather” brands are heavily reliant on the calendar fourth quarter.
He wrote, “Even when factoring in the brands that have less of a seasonal skew, VFC is still highly leveraged to this quarter, as it accounts for [about] 30 percent of consolidated revenues, and last year it was almost 85 percent of annual EPS. Thus, the current quarter is truly a ‘make or break’ quarter for VFC in terms of annual EPS generation.”
Both The North Face and Timberland are seen benefiting from a “meaningfully colder” calendar fourth quarter, particularly in the Northeast and Midwest. Nikic added, “Furthermore, if sell-throughs were strong during the peak season in Fall/Winter’25, they are likely to be rewarded with strong wholesale order books for Fall/Winter’26.”
At the same time, Nikic said that Vans “still has work to do, but we have seen some ‘green shoots’ lately that might mean that the worst is behind them.”
The analyst also sees the recently completed Dickies sale as “addition by subtraction” as it only slightly impacts P&L results but reduces debt leverage by about half a turn. Nikic added, “And on that note, we think the debt balance will continue to move lower, which should improve investor sentiment on this name (as the balance sheet was one of the core tenets of the bear thesis in recent years).”
Shares of VF Corp. closed Thursday at $20.19, up 99 cents.
In removing Deckers from its conviction list, Nikic said he believes the company “has entered a slower-growth stage of life at both the Ugg and Hoka brands, and margins may drift downward in the coming years to sustainable long-term levels.” He noted that, after several years of robust growth for both brands, Ugg has now posted three consecutive year-over-year declines in the DTC channel, and Hoka registered single-digit DTC growth for the first time since its 2013 acquisition.
He said a major reason for Needham’s lower level of conviction on Deckers is recent challenges at Ugg, which saw strong success coming out of the pandemic, “as the trend towards cozy/comfortable footwear brought many first-time shoppers to the brand.”
He sees the weaker DTC sales as a sign that “demand for Ugg seems to have slowed.” While wholesale growth for Ugg has remained strong, he’s concerned it will also slow as demand realigns. As a result, whereas Ugg was able to drive strong double-digit growth in recent years, we think it could return to being a more modest-growth brand in the coming years (e.g., LSD-MSD growth annually).”
On Hoka, Nikic noted that Hoka’s deceleration to single-digit DTC growth in the last three quarters follows high-20’s growth in late-2024. The slowdown stands in “stark contrast” to rival On’s DTC growth in the range of 40 to 50 percent in the first nine months of 2025. Nikic also noted that Nike’s renewed focus on the running category is a cause of concern for investors.
Nikic added, “In this environment, where the largest sneaker company in the world is pushing hard on Hoka’s territory, while On continues to exhibit extremely strong momentum, it will likely be difficult for Hoka to generate outsized growth. And in fact, it’s possible that Hoka could become a single-digit-growth brand at some point over the next 12-24 months.”
Needham still has a “Buy” rating on Decckers and even adjusted its price target up slightly, to $115 from $113. Nikic noted the stock’s valuation has come down, declining about 50 percent in 2025. He wrote, “We remain at Buy on the stock (though with a lower level of conviction than before) due to the quality of the two brands and the cash-rich balance sheet, as well as compelling valuation vs. peers.”
Image courtesy Nike
