On Tuesday, Citi reiterated its Buy rating on Nike shares (NYSE:NKE), maintaining a price target of $102.00 despite concerns in the Chinese market. The reiteration comes after Topsports, a significant sportswear retailer and wholesale partner to Nike in China, issued a profit warning. The warning indicated that for the six-month period ending August 31, Topsports expects operating profit to decrease by 35% year-over-year. This decline is attributed to sales reductions, especially in their store channel, which management has linked to a weakening consumer environment.
Topsports also highlighted an increase in discounts and promotions, alongside higher inventory levels, which are adversely affecting gross margins. These developments are seen as additional negative indicators for Nike's performance in China. Nevertheless, Citi notes that Nike's forecast for fiscal year 2024 already anticipates a substantial reduction in sales within the Chinese market.
According to Citi's projections, Nike's China sales in constant currency for the first quarter of fiscal year 2025 (ending in August) will drop by 8% compared to the fourth quarter of fiscal year 2024 (ending in May), which saw a 7% increase. For the full fiscal year, Citi expects Nike's China sales in constant currency to decline by 4%. The firm expresses growing concern regarding the potential impact of heightened promotions and increased inventory in China on Nike's gross margins for the first quarter and full fiscal year 2025.
In other recent news, financial services firm Stifel has lowered its price target for Nike Inc (NYSE:NKE). shares from $88.00 to $79.00 due to increased competitive pressures in the U.S. market. This decision follows Stifel's 2024 Back to School Athletic Footwear Survey, which reveals a decline in Nike's footwear market share and a decrease in the relevance of its core product lines. Furthermore, Piper Sandler initiated coverage on Nike with a Neutral rating, suggesting a potential multi-year reset for the company.
On the other hand, Nike's stock rating was upgraded from Sell to Buy by Williams Trading, which also raised the company's price target to $93.00. This upgrade came after the reinstatement of Tom Peddie as Vice President of Marketplace Partners, a move that has reportedly been well-received by Nike's wholesale partners.
In addition, Pershing Square (LON:PSHP) Capital Management, led by billionaire investor William Ackman, acquired approximately 3 million Nike shares. Bernstein SocGen Group maintained an Outperform rating on Nike, observing improvements in the brand's performance metrics.
Lastly, amid these developments, Nike is undergoing significant workforce reductions, affecting less than 5% of its employees.
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