Bank of America became the latest investment firm to cut its rating on Nike Inc. because the company’s turnaround is taking longer than expected.
“We see downside risk to EPS estimates and valuation as Nike’s innovation continues to be overshadowed by a pressured classics business, while category and macro pressures build,” wrote Lorraine Hutchinson, Bank of America’s analyst in the space, in a note issued Friday, September 25.
Hutchinson cut her EPS estimates for FY27 and FY8 EPS by 11 percent and 12 percent, respectively, and now expects negative sales growth through F27E versus prior expectations of a spring inflection. Her price target was cut to $30 from $47.
Nike shares closed Friday at $35.75, down 24 cents. The stock’s 52-week range is between $35.22 and $76.97. Nike is scheduled to report results for the fiscal first quarter ended June 30 after-market close on October 1.
In her note, Hutchinson said that while North American wholesale has been an “area of strength, “ with sales ahead 14 percent in FY26 against flat overall growth, some sell-throughs have been “lagging sell-in” because classic styles have declined and new launches have missed expectations. The weak sell-through “puts forward order books at risk as retailers become less willing to make a bet on newness until success is proven,” she said.
Against robust sales gains a year ago and expected pressure on spring orders, the analyst now expects wholesale sales in North America to decline beginning in the fiscal second quarter ended November 30 through the rest of FY27.
Hutchinson also noted Nike’s distribution move in China to stop selling to third-party online sellers, including Topsports and Pou Sheng, at the start of 2007 and focus on sales at Nike.com.cn, the Nike app, and official storefronts on major platforms like Tmall, JD.com, and Douyin will “likely cause promotional pressure” through the fiscal second quarter. After that, while Nike expects to present products “more cohesively online,” weak demand will undermine attempts to return to growth in the region. Hutchinson wrote, “Competition is intense; the quest for newness is higher than ever, and we see risk that sales decline at least through F27.”
Hutchinson further said Nike’s shares are now unlikely to hold onto their current premium multiple amid likely EPS guidance cuts. The analyst concluded, “We see some green shoots on product innovation, but those have been dwarfed by weaker larger casual categories. We think the multiple could compress as the turn is pushed to F28.”
Several investment firms have reduced their rating on Nike’s stock this year after the company reduced its guidance in late March and struggles to regain top-line momentum amid still elevated inventory levels in the marketplace. Other firms reducing their ratings on Nike this year include Baird, Truist, J.P. Morgan, KeyBanc, Evercore ISI, RBC Capital, Goldman Sachs and HSBC.
Image courtesy Nike
