Nike Inc (NYSE:NKE, ETR:NKE) shares jumped almost 15% on Friday following the release of a rough fourth quarter report, with significant declines in sales and profits anticipated by investors.
The company’s guidance also reflects near-term headwinds, but marked an improvement from previous trends.
Fiscal first quarter 2026 revenue is expected to decline by mid-single digits and gross margins are projected to contract by 350 basis points to 425 basis points.
Following the report, Jefferies analysts doubled down on their bullish stance on the athletic apparel and footwear brand, repeating their ‘Buy’ rating and a price target of $115, implying upside of almost 85% at the time of writing.
The analysts see the fourth quarter of fiscal 2025 as the bottom of Nike’s turnaround. With easier comparisons ahead and a reset of Nike’s core lifestyle franchises, Jefferies argues that both revenue and margin trends are poised to improve meaningfully.
CEO Elliott Hill’s actions to cut through excess product and reset the brand’s product and channel strategy appear to be gaining traction, they added.
“We see better product ahead leading to improved orders and sell-through, margin improvement and sales inflecting in the coming quarters as compares are absurdly easy,” they wrote.
Nike’s inventory problem, especially in over-assorted lifestyle categories like the Air Force 1, Air Jordan 1, and Dunk, has been a central drag on performance.
Jefferies noted that inventory remains high, but the cleanup is on track. “Management reiterated confidence in reaching a clean inventory position by the end of the first half of 2026,” they noted.
Performance wins
One of the most encouraging signs in the quarter came from Nike’s performance categories, the analysts believe. Running grew high single digits, led by the Vomero 18, which is notably now a $100 million franchise with growth across all regions.
In basketball, the company delivered a breakout moment with the sell-out debut of A’ja Wilson’s A1 signature shoe, further evidence that Nike’s focus on sport-led storytelling is beginning to bear fruit.
“Product innovation gaining steam,” the analysts wrote, adding that Nike’s renewed attention to athletes and performance is reenergizing its brand across channels.
CEO Hill is also pushing for a more expansive and inclusive global footprint, including a Gen Z-focused collaboration with Urban Outfitters, more than 200 new women-led retail doors, including boutiques like Aritzia, and a curated Amazon store featuring running, training, and basketball products.
“Nike continues to broaden its physical and digital reach to meet consumers wherever they are,” the analysts wrote.
Nike shares traded up 14.9% at about $72 in early trade on Friday.