Jefferies analysts see a 'sleeping bear' awakening at Nike

Core Viewpoint - Nike is expected to show signs of recovery after a prolonged decline, with Jefferies predicting a potential turning point in its upcoming earnings report [2]. Financial Performance - Nike's stock has decreased approximately 22% over the past year due to issues like overstocked inventory and increased competition from brands like Hoka and On [2]. - Jefferies anticipates a "modest beat" in earnings, projecting $0.29 per share against a consensus of $0.27, with revenue expected to be around $11 billion, reflecting a 4% decline year-over-year [2]. - The firm expects gross margins to decrease by about 350 basis points and operating margins to drop by 600 basis points, primarily due to costs associated with clearing out older inventory [2]. Market Sentiment - Jefferies maintains a buy rating on Nike, setting a price target of $115, which is approximately 66% higher than the previous week's closing price [2]. - Positive indicators include an increase in foot traffic for Nike in August, making it the only brand in Jefferies' coverage group to report growth [2]. - Retail partners have expressed optimism, with over 80 mentions of Nike in retailer transcripts this year, indicating stronger holiday order books compared to the previous year [3]. Strategic Initiatives - Nike has increased its marketing expenditure by 9% to $1.63 billion for the current quarter, in preparation for significant events in 2026, including the men's World Cup [2]. - The company is focusing on broad distribution and product innovation to enhance consumer engagement [3].