Truist Securities became the latest investment firm to reduce its stock rating on Nike Inc. as last week’s downward EPS revision by Dick’s Sporting Goods lowered the firm’s expectations around Nike’s recovery.

In a note issued last Wednesday, August 26, Joseph Civello, Truist’s lead analyst in the space, said Dick’s significant guidance readjustment “signals incremental murkiness around NKE’s turnaround progress “ in downgrading Nike’s shares to “Hold.” Civello also lowered his rating on Dick’s to “Hold.”

As reported here last week, Dick’s slashed its forecast for adjusted EPS to a range of $11.00 to $12.00 from $13.50 to $14.50 previously. The sales outlook for the year was reduced from between $22.1 billion and $22.4 billion to between $21.9 billion and $22.2 billion.

The core Dick’s business –Dick’s Sporting Goods, Dick’s House of Sport, Golf Galaxy, Going Going Gone! and Public Lands – is still expected to grow comps between 2.5 percent and 4 percent. However, comps at the Foot Locker business are now expected to range from flat to down 2 percent, down from growth of 1.5 percent to 3 percent under previous guidance.

In the note, Civello said he had been “cautiously optimistic” about Nike’s turnaround progress given the success of Nike’s recent running launches, including the Vomero, Pegasus and Structure series; as well as positive comments on quarterly calls by both Nike and Dick’s that Nike’s inventory gluts in the marketplace were “meaningfully improving.” He noted that Nike officials had been calling out improving conditions at U.S. wholesale and noted that its fiscal fourth quarter ended May 31 marked the first quarter Nike’s sales grew at Foot Locker in over four years.

Civello added, “That said, we believe a lot of this optimism was likely driven by DKS underestimating the level of cleanup activity needed & brand heat degradation given the 2 key pressures cited by mgmt.: 1) legacy silhouettes no longer resonating the way they used to and 2) underperformance from 2Q launches vs their expectations. As a result, we believe it is best to move to the sidelines until there is more clarity around both the cleanup process and pipeline of newness coming in 2027 (and what level of full price selling that can generate).”

In downgrading Dick’s, Civello wrote that he had expected Dick’s “category-leading position would provide more cushion against market-wide pressure, but we now see headwinds as too severe as further investments in Foot Locker & House of Sport (HoS) likely drive incremental earnings pressure.”

He also noted that while Dick’s officials indicated they’re taking steps to add more “in-demand brands,” On, Adidas and Deckers Brands, the parent of Hoka, have all noted recently they’re prioritizing DTC growth and conservatively planning wholesale sell-ins.

The downgrade of Dick’s also reflects the risks Dick’s could be taking on by increasing marketing investments at Foot Locker amid the broader weakness in lifestyle footwear and the likelihood that growth within its retail media business may slow should the retail climate remain promotional. Reducing access to premium brands could also impact House of Sports’ recent robust growth.

Finally, Civello believes it’s “hard to get constructive” in the near-term on Dick’s as Dick’s management warned that it expects continued pressure in the second half of this year and faces tough comparisons in 2027’s first half, including due to this year’s tax refund boost, the World Cup, and the Knicks championship.

Truist reduced its price target on Dick’s to $135 from $270 and on Nike to $42 from $47.

Dick’s also saw downgrades from Telsey Advisory Group and KGI Securities after reporting Q2 results that missed expectations and slashing its outlook. Nike has endured a number of downgrades as its recovery is taking longer than investors hoped, including from Needham, Goldman Sachs, JP Morgan, RBC Capital and Piper Sandler. According to Barron’s, Nike has 14 “Buy” ratings from analysts, 18 “Hold” and two “Sell” ratings. Dick’s has 16 “Buy,” 10 “Hold,” and two “Sell” ratings.

Image courtesy Foot Locker/Dick’s Sporting Goods, Inc.