NIKE's Inventory Cleanup Continues: Is it Too Little, Too Late?

Core Insights - NIKE Inc. is focusing on inventory streamlining and marketplace reset as part of its turnaround strategy, but there are concerns about the timing of these efforts in relation to the broader growth slowdown [1][3] - In Q4 fiscal 2025, NIKE's revenues fell nearly 12% year-over-year, while inventory levels remained flat, indicating ongoing challenges despite aggressive discounting [1][8] - The company aims to achieve a "healthy and clean" inventory position by the end of the first half of fiscal 2026, which will involve more discounting and continued pressure on digital traffic [2][8] Inventory Management - NIKE is implementing a phased inventory reset, expecting improvements in inventory quality and sell-through rates in regions like North America and EMEA, while Greater China requires deeper discounting and supply cuts [2][3] - Analysts express skepticism about NIKE's reliance on markdowns and value channels, which may dilute the brand and weaken long-term consumer perception [3] Competitive Landscape - Competitors like adidas and lululemon are also managing inventory challenges, with adidas reporting double-digit declines in inventory levels and lululemon facing rising pressures but maintaining confidence in inventory quality [4][5][6] Financial Performance - NIKE's stock has declined 2.2% year-to-date, outperforming the industry's decline of 6.6% [7] - The forward price-to-earnings ratio for NIKE is 41.17X, significantly higher than the industry average of 29.33X [9] - The Zacks Consensus Estimate indicates a 22.7% year-over-year decline in earnings for fiscal 2025, followed by a projected growth of 55% for fiscal 2026 [10]