Key facts
- RBC Capital Markets downgraded Nike to 'Sector Perform' from 'Outperform'.
- Nike's 12-month price target was cut to $50 from $70 by RBC Capital Markets.
- S&P Global Ratings downgraded Nike to 'A+' from 'AA-' citing declining margins and tariff pressures.
- RBC cited slower-than-anticipated recovery, increased competition, and DTC/wholesale disconnects.
- Nike plans to adjust its supply chain and implement phased price increases.
RBC Capital Markets has downgraded Nike Inc. to 'Sector Perform' from 'Outperform' and significantly reduced its 12-month price target to $50 from $70, citing concerns that the company's recovery is progressing slower and more narrowly than anticipated.
The firm also highlighted increasing competition in the premium activewear market from brands like Lululemon, Alo Yoga, and Vuori, as well as a growing disconnect between wholesale shipments and direct-to-consumer sales, particularly in North America. RBC believes that the upcoming World Cup, ongoing inventory reductions, and a lack of new growth initiatives will not be sufficient to drive a sustained revenue rebound in the remainder of calendar 2026.
Separately, S&P Global Ratings downgraded Nike to 'A+' from 'AA-' due to declining margins, ongoing tariff exposure, and a prolonged turnaround effort. S&P noted that U.S. tariffs on footwear imports could add as much as $1 billion in gross incremental costs, pressuring margins, especially in the first half of fiscal 2026. Nike plans to address these pressures by reducing U.S. footwear imports from China and implementing phased price increases starting in fall 2025.
Nike shares have declined about 50% since CEO Elliott Hill's appointment, while rival Adidas has gained approximately 70% over a comparable period. RBC projects Nike's three-year revenue growth outlook at around 3%, below the sector average of 6% and Adidas's 8%. The firm also cut its fiscal 2027 and 2028 earnings per share estimates. Goldman Sachs and UBS recently acknowledged early signs of progress in Nike's turnaround but reiterated 'Neutral' ratings, suggesting the broader turnaround will take longer than expected.