Analysts at Jefferies remain sidelined on Nike Inc (NYSE:NKE, ETR:NKE) shares, sharing that they won’t be buying the stock amid share price weakness.
Nike shares traded hands at $82 on Thursday afternoon, down 8.5% over the last week on disappointing earnings.
“After a tough quarter and outlook, shares are trading down, with many thinking this could be a good entry point. However, based on our checks, promos are rising, new product will take time to resonate if it does at all, and in the meantime, competition is proving to be more severe,” analysts wrote in a note to clients.
“As a result, we wouldn’t buy weakness and remain sidelined on shares.”
Analysts noted that while Nike has introduced new products, particularly in the running category with models like the Vomero and Vaporfly, markdowns in the mall channel indicate that the brand itself may be struggling, not just the individual products.
Digital sales have also declined significantly, with a 20% drop year-over-year, suggesting that consumers are increasingly turning to competing brands such as On, HOKA, and New Balance, which are gaining shelf space in retail stores. Competition is intensifying, as retailers broaden their assortment of these rival brands.
This situation differs from past challenges, where Adidas was Nike's main competitor, as the market has become more fragmented with multiple brands innovating.
Additionally, Nike's struggles in China have exacerbated its issues. Sales in Greater China fell by 13%, and digital sales in the region plummeted by 31%, resulting in inventory build-up due to lower sell-through rates.
All of this means that incoming CEO Elliott Hill faces considerable challenges, the analysts wrote.
“We believe the new CEO is a step in the right direction but, acknowledge they are not here yet,” they wrote.
“Once on the job it will take time to address the crosscurrents of share loss, a challenging consumer backdrop, and shifting fashion trends, all giving us pause to owning shares.”
The analysts awarded Nike a ‘Hold” rating and a $85 price target.
“So Just Don’t Buy It… meaning Nike shares,” they concluded.