Investing.com -- Nike Inc's (NYSE:NKE) turnaround strategy under new CEO Elliot Hill is creating short-term challenges but could set the stage for recovery by 2025, Truist said in a note.
The company has lowered its guidance for the second half of fiscal 2025, projecting a low-double-digit percentage revenue decline in the third quarter and gross margin pressure of 300-350 basis points. Fourth-quarter challenges are expected to intensify due to accelerated inventory clearance and higher marketing investments.
“We believe the outlook may prove conservative, given that this earnings call was Mr. Hill’s first time addressing investors since taking the helm as CEO,” analysts wrote.
Truist cut its FY25 earnings forecast to $2.00 per share from $2.50, citing the amplified near-term pressures. It also lowered Nike's price target to $90 from $97.
Hill’s initiatives include improving wholesale partnerships, boosting the direct-to-consumer business, and revamping brand marketing. Such moves are expected to simplify year-over-year comparisons and create opportunities for growth in 2026.
The brokerage believes investor sentiment is nearing a bottom, noting that shares have been relatively stable despite consecutive guidance cuts.
Truist said Hill’s decision to accelerate restructuring is prudent and positions Nike for long-term success, adding that the company's comprehensive plan could lead to outperformance in the coming years.