<\/p>\n
For years, a new Air Jordan release worked like a holiday. Sneaker fans set alarms, refreshed the app, and paid resale prices when they missed out.<\/p>\n
That scarcity was the product. Lately, Nike has been rolling out so many retro pairs that the magic has worn off — and the company now admits it.<\/p>\n
Nike (NKE) is still the biggest name in athletic footwear, with roughly 40% of the global market, according to Bank of America. It brought in about $46.4 billion in revenue in fiscal 2026, which ended in May.<\/p>\n
Management insists the core of the business is healthy. “The Sport Offense is driving measurable progress across our performance business,” CEO Elliott Hill said in Nike’s fiscal first-quarter earnings release.<\/p>\n
The rest of the house is another story. “Simply put we’ve been oversupplying our iconic retro product,” Hill said on the company’s earnings call.<\/p>\n
“When consumers see the Jumpman, it should feel special. It should feel earned,” he added.<\/p>\n
According to a Bank of America research report shared with me, the damage from that oversupply, and from China, will last longer than the bank expected just a week ago.<\/p>\n
Nike guidance falls far short of Wall Street’s bar<\/p>\n
Nike’s revenue fell 4% to $11.2 billion in the quarter ended Aug. 31, or 5% on a currency-neutral basis, the company reported Oct. 1. Nike Direct sales dropped 8%, and Converse sank 28%.<\/p>\n
The outlook was worse. <\/p>\n
“We currently expect revenues to decline in the high single digits range,” CFO Dave Denton said on the call, guiding to adjusted earnings of $1.15 to $1.35 a share for fiscal 2027.<\/p>\n
That range sits well below the $1.67 consensus Bank of America cited from Visible Alpha. Shares fell about 9% in premarket trading Oct. 2 to roughly $32, the lowest since September 2013, Roic.ai reported, leaving the stock down about 45% this year.<\/p>\n
Read more: Nike making its most famous sneakers harder to buy<\/p>\n
Bank of America analyst Lorraine Hutchinson cut her price target to $24 from $30 and reiterated an Underperform rating in her report, titled “Another reset.” It was her second cut in about a week, after she downgraded Nike from Neutral with a $30 target on Sept. 25, 24\/7 Wall St. reported.<\/p>\n
“Despite another significant reduction to our estimates, we continue to see downside risk to the premium multiple until the timing of a revenue inflection becomes clearer,” wrote Hutchinson.<\/p>\n
The new target sits about 32% below the stock’s $35.15 close before the report and values Nike at 16 times the bank’s fiscal 2028 earnings estimate. Hutchinson also cut her fiscal 2027 and 2028 earnings forecasts by 21% and 22%.<\/p>\n
BoA cut Nike’s target to $24, maintaining Underperform as Jordan, Sportswear, and China weigh on sales.<\/p>\n
Robert Way \/ Getty Images<\/p>\n
Jordan retros and China drag on sales<\/p>\n
Sportswear made up about half of Nike’s first-quarter sales and declined at a low double-digit rate, while Jordan Brand, 13% of sales, fell in the mid-teens, Hutchinson wrote.<\/p>\n
The bigger worry is what happens next with retailers. “Several higher-volume footwear styles sold through below expectations, leaving excess inventory and resulting in lower wholesale order books for the coming seasons,” wrote Hutchinson.<\/p>\n
Hill acknowledged the same problem. “Looking ahead, that has impacted our future order books as we proactively work with our wholesale partners,” he said on the call.<\/p>\n
More Retail:<\/p>\n
Major shareholder could force Barbie maker to consider a sale<\/p>\n
Department store chain bets on a new shopping experience<\/p>\n
British fashion brand that went bankrupt reopens its first store<\/p>\n
China is a tougher fix. Retail sales of consumer goods there rose just 0.4% in August from a year earlier, according to official data reported by the Qatar News Agency.<\/p>\n
Local rivals Anta Sports and Li Ning have also been winning over Chinese shoppers, XTB analysts noted after Nike’s previous quarter.<\/p>\n
Nike’s own trend is getting worse. Greater China sales fell 9% in the year-ago quarter, Benzinga reported, compared with a 26% constant-currency drop this time, according to Bank of America.<\/p>\n
“In the near-term, revenues and profitability in China will be impacted,” Hill said.<\/p>\n
Given that backdrop, it’s easy to see why Hutchinson expects no quick rebound. “We expect the reset to take multiple seasons and weigh on both sales and profitability,” wrote Hutchinson.<\/p>\n
She isn’t the only skeptic. Goldman Sachs trimmed its target to $30 from $38 with a Neutral rating, as we reported at TheStreet, and Morgan Stanley rates the stock Underweight with a $27 target, according to Roic.ai.<\/p>\n
Bank of America pins the recovery on running shoes<\/p>\n
There is a bright spot. <\/p>\n
“If we were to exclude the reset in Greater China, Nike Performance would have been up low double digits in Q1,” Denton said.<\/p>\n
“Running is up double digits again with consistent share gains,” Hill added.<\/p>\n
Hutchinson agrees running is working, but she sees it as only a down payment. <\/p>\n
“The eventual sales turn will depend on growing levels of newness to drive stronger customer interest,” wrote Hutchinson, who expects innovation to take center stage at Nike’s November investor day.<\/p>\n
Much will likely depend, however, on whether Nike can fund that comeback without straining its payout. Bank of America projects $1.64 a share in dividends for fiscal 2027 against just $1.13 in earnings, which means Nike would pay out more than it earns.<\/p>\n
The bank does model $2.8 billion in free cash flow that year, enough to cover roughly $2.4 billion in dividends. “The dividend remains a significant priority in our capital allocation strategy,” Denton said.<\/p>\n
Nike is also leaning on a new cost program called Pace, which Bank of America said targets $2.5 billion in gross savings by fiscal 2031.<\/p>\n
In my view, that’s the real test for income investors. A dividend yield near 5% looks generous, but it now rests on cost cuts that haven’t been delivered yet.<\/p>\n
Hutchinson laid out the risk plainly for anyone tempted by the beaten-down stock.<\/p>\n
“Earnings increasingly depend on gross margin expansion and cost control, leaving downside risk to estimates and the multiple if execution falls short,” wrote Hutchinson.<\/p>\n
Related: Nike making its most famous sneakers harder to buy<\/p>\n
#Nike #Jordans #easy #buy #Bank #America #noticed<\/p>\n","protected":false},"excerpt":{"rendered":"
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