Nike Stock Surges 17% as CEO Signals End to Struggles, Despite Ongoing Inventory Challenges
Nike shares jumped 17% on Friday as investors reacted positively to signals from the company that the worst of its recent difficulties are over, following the release of its fiscal fourth-quarter earnings report. The surge follows an initial dip after the report’s release, ultimately demonstrating renewed confidence in the athletic apparel giant’s turnaround strategy.
Turnaround Plan Gains Traction
During Thursday’s earnings call, Nike reiterated that the current quarter would represent the peak financial impact of its “Win Now” turnaround plan. This assurance calmed investor anxieties surrounding potential disruptions from tariffs impacting key manufacturing regions like China and Vietnam. Despite a challenging quarter marked by declining sales and profits, CEO Elliott Hill emphasized the company is emerging from a prolonged slump.
“The results we’re reporting today in Q4 and in FY25 are not up to the Nike standard, but as we said 90 days ago, the work we’re doing to reposition the business through our ‘Win Now’ actions is having an impact,” Hill stated. “From here, we expect our business results to improve. It’s time to turn the page.”
Initially, the lack of specific details regarding the progress of Nike’s turnaround strategies led to a fall in share prices after the closing bell on Thursday. However, by the end of the hour-long discussion with executives and Wall Street analysts, the stock had rebounded, climbing over 10% in extended trading.
Strategic Shifts and New Initiatives
Beyond the turnaround plan, Hill highlighted promising developments in new product launches and efforts to rebuild relationships with wholesale partners – key priorities since he assumed leadership in October. A significant move announced during the call was Nike’s decision to resume sales on Amazon for the first time since 2019. The company is also actively focusing on attracting female consumers, launching products in over 200 women-led shops, including Aritzia, and releasing a collaboration with WNBA star A’ja Wilson, which reportedly sold out in just three minutes.
Analyst Upgrade Fuels Further Gains
The positive momentum continued into Friday morning, fueled by a wave of bullish commentary from financial institutions. HSBC upgraded Nike to a “buy” rating from “hold,” marking its first such recommendation in three and a half years. The firm also raised its price target to $80 per share, representing a potential 28% increase from Thursday’s closing price.
“Long in the making but we think the inflection is finally here,” wrote analyst Erwan Rambourg in a research note. “We think there is more than tangible evidence that Nike has a path to see its sales rebound in the not-too-distant future, and its margins to be repaired, and this despite an unfavorable tariff headwind.”
Challenges Remain Despite Optimism
Despite the positive outlook, Nike acknowledges significant hurdles remain. The company anticipates a mid-single-digit percentage decline in sales for the current quarter, aligning with Wall Street’s expectations of a 7% drop, according to LSEG. A major challenge is clearing out excess inventory of classic styles like Dunks and Jordans, which has necessitated deep discounts and reliance on off-price channels, impacting both profit margins and sales.
In fiscal 2025, sales of iconic models like the Air Force 1, Air Jordan 1, and Dunks decreased by over 20% year-over-year. This decline accelerated to 30% in the fourth quarter, resulting in a nearly $1 billion impact, according to finance chief Matt Friend. While Air Force 1 inventory is stabilizing, clearing the Dunk franchise remains a priority and will continue to pressure profits through the first half of fiscal 2026.
Both Hill and Friend cautioned that profits will remain under pressure through the first half of fiscal 2026 due to inventory challenges and tariff costs, but they anticipate improvement in the second half of the year. However, a firm timeline for returning to overall revenue growth remains elusive. When pressed on the possibility of revenue growth this year, Hill responded, “Just because of everything that’s going on, we’re going to take it 90 days at a time. We believe full recovery will take time.”
Nike’s journey toward full recovery is unfolding amidst a broader economic climate characterized by weaker consumer sentiment, rising debt, and ongoing tariff concerns. While the recent stock surge signals a positive shift, the company’s path forward requires navigating these challenges and executing its turnaround strategy with sustained diligence.
