BMO Capital Post Nike (NKE) Management Meet: 'More caution on the top-line outlook'

BMO Capital analyst Simeon Siegel reiterated an Underperform rating and $25.00 price target on Nike (NYSE: NKE).

The analyst comments "More caution on the top-line outlook: In our meeting, Mr. Denton highlighted the challenges in China and noted that there is likely additional work to do to reset the China business. This includes further cleaning up the online ecosystem, as well as potentially further reducing the wholesale door presence across the region, leaving us incrementally more cautious on China trends into FY28. Additionally, Mr. Denton feels that rightsizing the Jordan business is incredibly important, and noted he intends to pullback as aggressively as needed in order to do so, leaving us more cautious on FL's ability to comp positively in FY27. Other incremental info from our meeting with management: (1) North America and Europe aren't in need of a reset, though assortment levels will be flexed up/down retailer by retailer; (2) China is expected to decline faster in the rest of FY27 vs. 1Q; (3) The management of the sportswear category is too lumped together, and Mr. Denton intends to eventually split management of the category by region; (4) Management is open to exploring different business models across regions which the goal of maximizing shareholder returns, including potential for a China JV; (5) the PACE program has been well underway prior to Mr. Denton's arrival at NKE; (6) As part of PACE, resources are being taken from the geo-level and being re-distributed to the more local level, including greater resources for China; (7) The vast majority of PACE program savings are expected to flow through to the bottom line; (8) Management acknowledged poor comp performance, and noted removing of comp reporting by region was done to refocus investor attention away from what is viewed as an insignificant metric; (9) The five-year targets outlined at the November 16/17 investor day will be for FY27-FY31; (10) Management does not plan to give quarterly guidance for the rest of FY27, though may give quarterly guidance for FY28."

For an analyst ratings summary and ratings history on Nike click here. For more ratings news on Nike click here.

Shares of Nike closed at $37.53 yesterday.

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