Nike’s innovation focus a bright spot as grim sales forecast sends shares lower

Nike Inc (NYSE:NKE, ETR:NKE) shares tumbled almost 8% after the athletic apparel and footwear brand’s sales outlook overshadowed better-than-expected fiscal third quarter earnings. Shares of Nike traded down 7.8% at $93 late morning on Friday. Analysts at Bank of America Securities noted that Nike management’s guidance of a low-single-digit decline in sales for the first half of 2025 was below their estimates and the consensus forecast. They lowered their fiscal 2025 EPS estimate to reflect slower sales growth, partly offset by selling, general and administrative cost control, by 2% to $4.05. Based on their lower estimates and multiple which reflect a longer path to sales growth, they have reduced their price target on the stock from $120 to $110. They remain ‘Neutral’-rated on Nike, encouraged by its increased focus on innovation but noting the lack of visibility on the longer-term path for sales and margins. “The pressure is the result of a decision to accelerate the lifecycle management of certain product franchises like Air Force 1 and older Pegasus models. This will allow for focus on newer innovation and ensure that these brands don’t become stale,” they wrote. “While innovation will build over time, it is insufficient to offset these sales challenges until at least the second half of 2025.” UBS analysts, meanwhile, reiterated their ‘Buy’ rating for Nike, on their view that changes being made by the company will cause its business to inflect over the next 12 months. They cited four important changes: bringing back the category offence and a focus on sports, adjusting its direct-to-consumer strategy, ramping up marketing spend, and investing more in product innovation. However, they noted the downside risk is that the inflection takes longer than they expect. “Two things can go wrong. Sales of Nike’s top-selling shoes may have to shrink to much lower levels before stabilizing. If so, this could be a drag on sales for longer than expected,” they wrote. “[Second], for Nike’s sales to accelerate in the second half of 2025, it must successfully introduce new product innovations. However, it is hard to forecast how successful new products will be. This creates a level of risk Nike’s sales growth rate doesn’t improve in the second half of 2025.” The bank’s analysts lowered their price target on Nike from $138 to $125 based on a lower sales outlook, reducing their EPS target for fiscal 2026 by 2%.