Nike Faces Challenges Amid Inventory and Promotion Pressures

Raymond James analysts maintained their Market Perform rating for Nike (NYSE:NKE), citing continued challenges in the company's efforts to drive growth and turnaround performance. The outlook reflected concerns over lingering inventory issues and increased promotional activity impacting margins.

For the second quarter of 2025, scheduled for December 19, Raymond James projects Nike to report earnings per share, revenue, and gross margins slightly below consensus estimates. Much of the quarter was likely spent addressing legacy inventory, while new innovations appeared to scale more slowly than anticipated, limiting the potential for an upside surprise in growth.

Channel checks pointed to ongoing headwinds, with data from Google Trends, mobile app activity, and promotional comparisons indicating a subdued environment. Additionally, read-throughs from Foot Locker highlighted higher year-over-year promotional activity for Nike and Jordan products, particularly during the Cyber-5 period, which aligned with Nike’s guidance for lower gross margins due to discounting.

Selling, general, and administrative expenses were expected to remain flat year-over-year, including adjustments for a one-time charge in the prior year. While cost control could lead to an earnings beat, the analysts believe it is unlikely to significantly boost the stock’s valuation. Nike’s current trajectory remained a “show-me” story, with analysts cautious about declaring a definitive turnaround.