MW Nike needs more than Tim Cook to rescue its stock, amid 'longer than expected' turnaround
By Bill Peters
Needham analysts downgraded Nike stock on slow turnaround progress, while China 'has become a puzzle that management is struggling mightily to put back together'
Analysts have debated the state of Nike's turnaround progress under CEO Elliott Hill.
Nike's turnaround is taking longer than expected, its business in China is a bigger problem, and recent stock purchases from CEO Elliott Hill and Apple CEO Tim Cook have pushed the stock closer to its limits, Needham analysts said Thursday.
Analysts downgraded Nike's $(NKE)$ stock to hold, and they withdrew their price target on the company. Still, shares were up 2.9% on Thursday.
The sneaker and athletic-gear giant last month said its turnaround was "in the middle innings." But analysts have debated the state of the company's progress, as it tries to focus more deeply on athletes' needs, sell off more casual sneakers that once oversaturated the market, and turn its online shop into a higher-end destination amid heightened competition.
"Although we continue to believe that CEO Elliott Hill is doing the right things for the brand long-term (re-focus on sport, re-focus on product innovation, re-engagement with key wholesale partners, etc.), we believe that the turnaround is taking longer than expected, and visibility into the turnaround remains low," Needham analysts Tom Nikic and Matthew Quigley said in a research note on Thursday.
Nike highlighted its rebound in North America during its earnings call last month. But the Needham analysts were concerned about the gap between sales at Nike's own stores and websites, which have fallen over the past several quarters, and those for outside retailers, which have run higher.
They had questions about whether the Nike brand was compelling enough to justify the company's bigger push into those outside retailers. They pointed to their own survey data that showed a dip in consumer interest in buying Nike products ahead of the holidays, and Google search trends showing that "consumers continue to drift away from the Nike brand."
Nike's stock is down 9% over the past 12 months. As with everyone else in the retail, sneaker and clothing universe, Nike has had to navigate tariffs and an inflationary environment that has suppressed consumer-spending appetites.
Last month, Nike said that, in the Greater China region, where sales last quarter fell 17%, the company had underinvested in stores and needed to become a bigger premium destination there. Hill said that in China, Nike had turned into a "lifestyle brand competing on price."
The Needham analysts said that "it sounds as though China has become a puzzle that management is struggling mightily to put back together."
"While this region was once a shining star for the company and a key tenet of the bull thesis, it has been a challenge for the company essentially since the COVID pandemic began," they continued.
Over recent weeks, regulatory disclosures showed that Hill and Cook, who is a longtime Nike board member, spent $1 million and roughly $3 million, respectively, to buy Nike shares. The purchases lifted Nike's stock, but the Needham analysts said that the share price was "closeto our prior $68 price target, resulting in less than 10% potential upside vs. our prior target."
"Thus, taking all this into account, we are stepping to the sidelines pending greater clarity around the turnaround," they said.
Elsewhere in the note, the analysts grew more bullish on VF Corp. $(VFC)$, citing improving trends for Vans sneakers and strong holiday demand for The North Face and Timberland. They also upgraded Steve Madden $(SHOO)$ to buy, saying that it stood to benefit from shifting fashion trends - in particular, a move away from athleisure and a move toward dressing up.
More broadly, the analysts said, profit margins could be a bigger focus this year for clothing and footwear brands, as Wall Street's focus shifts from last year's tariff hit to companies' efforts to blunt the impact. Analysts are also focused on the implications of the Supreme Court's ruling on emergency-powers tariffs, which could be announced as early as Friday.
Resilient shoppers, potentially lower interest rates, bigger tax refunds and low unemployment were positives for the consumer backdrop, they said. But they also noted a number of risks heading into 2026.
"There are key sources of uncertainty: consumer balance sheets aren't necessarily as strong as one might think (household debt at all-time highs, savings rate below pre-COVID norms), the threat of inflation looms, and geopolitical events remain a source of 'noise,'" they said.
-Bill Peters
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(END) Dow Jones Newswires
January 08, 2026 13:36 ET (18:36 GMT)
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