Nike Earnings on Deck: Turnaround Efforts Continue, But Will It Be Enough?

Nike's stock price (NYSE:NKE) is up 0.37% at $66 today, with earnings casting a shadow after market close.

The street is bracing for earnings, with the expected EPS of $0.37 for the quarter less than 50% that of last year ($0.78). Whilst profit is narrowing fast, revenue is expected to contract by 1.18% to $12.21 billion, before returning to growth into next year. FY27 is currently forecast at $49.16 billion in revenue, which would reflect a 5.1% growth rate as Nike looks to turn this ship around.

The options market is pricing in a move of 6.48% following the release, not unexpected after a volatile year. The stock trades 10.5% lower year to date, with bulls looking for a break back towards $70.

Nike has been actively investing in marketing to regain market share, particularly against rising competitors like On and Hoka. The company plans to allocate over $5 billion to marketing initiatives by 2026. However, analysts are skeptical that these investments will translate into immediate earnings growth. The company is currently grappling with challenges such as clearing discounted inventory and managing increased tariff costs, especially from manufacturing hubs in Vietnam.

Recent developments highlight the complexities Nike faces. Dick's Sporting Goods' strategic overhaul of its Foot Locker acquisition, involving store closures and inventory liquidation, indirectly reflects the competitive pressures Nike faces.

Foot Locker has been losing market share, partly due to Nike's increased focus on direct-to-consumer sales and declining mall traffic. This suggests that Nike's efforts to bypass traditional retailers are impacting the broader retail landscape.

Despite the near-term headwinds, some analysts remain optimistic about Nike's long-term prospects. JPMorgan upgraded Nike's stock to “overweight” in July, citing the company's plans to realign inventory with demand by the end of fiscal Q2 2026. This realignment involves $500 million in charges to clear excess stock. JPMorgan analysts project operating margins to improve from 5.3% to 10% by 2028, driven by strategic reforms and anticipated tariff relief.

Wells Fargo also recently upgraded Nike's stock, citing improving visibility. They anticipate a reversal of the negative estimate revision cycle that has plagued the company for the past three years. Wells Fargo expects Nike to exit fiscal year 2026 with revenue growth of 3-4% and gross margins expanding by 200 basis points. Their price target is $75.

The upcoming earnings report will be crucial in determining whether Nike's strategic initiatives are gaining traction. The aggressive marketing push, while costly in the short term, is viewed by some as a necessary investment to secure long-term growth and brand dominance. Look to guidance to provide the key here.