In This Article:
There was no doubt in Elliott Hill's mind.
"Nike (NKE) is back," the chief executive of the athletic footwear and apparel giant said in a January interview with Fortune Magazine.
"I think every company has a core of what makes them great," Hill said. "And I think sport is the core of what we are about. We are about human potential and performance."
But the Nike veteran, who freely admits that he has "an irrational love for this company," was also honest about the state of the iconic organization.
"I think we can be better," he said.
Related: Analyst reworks Olive Garden parent stock price target ahead of earnings
Hill has a long and movie-ready history with The Swoosh, starting as an intern in apparel sales in 1988 and working his way up to president of consumer and marketplace before retiring in 2020.
But the story doesn't end there: Hill returned to Nike last year as CEO, succeeding John Donahoe.
This was a tough time for the company, which Bill Bowerman and Phil Knight founded as Blue Ribbon Sports in 1964.
Nike CEO: We lost our obsession with sport
Nike's sales — as well as its stock price — were falling as the world emerged from the Covid-19 pandemic.
Upon his return, Hill said he and his leadership team hit the road, traveling to Los Angeles, New York, Amsterdam, London, Paris, Shanghai and Beijing and walking the high streets and shopping malls to see how consumers experienced the brand.
2025 stock market forecasts
He also met up with wholesalers and commissioners of the top sports leagues and found people were "rooting for a strong Nike."
"We lost our obsession with sport," he said during the company's December earnings call, his first as CEO. "Moving forward, we will lead with sport and put the athlete at the center of every decision."
The Beaverton, Ore., company is scheduled to report fiscal-third-quarter results on March 20, the same day that Air Max 1, Nike's latest collaboration with clothing brand Supreme, is slated to drop.
A random sampling of reactions to the new footwear on X shows the usual mix.
Downside:
“Good lord they couldn’t do more?” Slade asked.
“Boring af. Nike not even trying anymore,” said Phlipit.
Upside:
Ascension Seeker said: “Inspired design.”
C.Smith simply stated: “Nice.”
Nike shares are down nearly 27% from a year ago and off 3.5% since January.
Nike product cycle more important than Q3 profit: Analyst
Investment firms issued research reports on the company ahead of the earnings report.
Bank of America Securities analysts Lorraine Hutchinson and Christopher Nardone reiterated their buy rating and $90 price target.
"Management is moving quickly to reset the marketplace and clear aged inventory to allow a pipeline of new product to hit the market," the firm said.
B of A expects that Nike earned 22 cents a share in the quarter, compared with the Visible Alpha consensus of 28 cents.
"We argue 3Q results will matter less than the message about where we are in the product-reset cycle and evidence that new product is resonating," the firm said.
Prior to 2020, Bank of America said, management provided out-year guidance in the third quarter and last year it offered broad fiscal 2025 guidance.
“Times have changed — a lack of visibility on the product reset and consumer spending more broadly could cause management to wait another quarter to offer a fiscal 2026 outlook,” the investment firm said.
Related: Billionaire Bill Ackman makes a number of moves that turn heads
"We think mangement may provide some context for the expected fiscal 2026 margin recovery, but we would be surprised if explicit F26 earnings guidance is communicated," B of A added. "In the near term, we still expect sales and margins to be more severely impacted in 4Q relative to 3Q."
The analysts said they saw risk to margins in Nike's Q3. Management remains committed to reducing lifestyle inventory through wholesale buybacks, markdown dollars, and clearance ahead of new offerings planned in its five key sports: running, basketball, training, football and sportswear.
"One of the inventory actions is buying back product from retail partners; this will lead to elevated inventory on the balance sheet," the analysts said.
"We argue greater near-term margin pain actually improves the setup for the stock, as this is a sign that [CEO] Hill's emphasis on taking swift action to make way for new product is working as planned," the firm added.
TD Cowen raised its price target on Nike to $75 from $68 and affirmed a hold rating on the shares.
While the investment firm said it was encouraged by its promotional tracker within North America showing improvement, demand trends into spring remain weak.
Related: Veteran fund manager unveils eye-popping S&P 500 forecast