Athletic footwear provider Nike (NKE) has issued a disappointing forecast for its third quarter of Fiscal Year 2025. The company expects a low double-digit revenue decline and a gross margins contraction of 300 to 350 basis points.
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The company also projects continued revenue challenges and margin pressures into the fourth quarter. Additionally, Nike anticipates a drop in its 2025 summer order books compared to the previous year.
This outlook comes as Nike undertakes significant restructuring efforts to combat declining sales and enhance the performance of its digital business. In recent months, the company has faced margin challenges due to heavy reliance on promotions and high inventory levels.
Nike’s Turnaround Strategy Under CEO Elliott Hill
Under its CEO Elliott Hill, the company is undertaking a turnaround strategy focused on prioritizing profits over short-term revenue growth. This strategy also includes clearing out older and classic sneakers from existing inventory and rebuilding relationships with retail partners. Additionally, Nike is shifting to a full-price model to enhance brand value. This strategy focuses on attracting new customers and driving premium pricing, instead of relying on discounts or promotions to meet existing demand.
Investors should note that Nike’s fiscal Q2 results, released yesterday, reflected the impact of these initiatives. Revenue declined 8% year-over-year in the quarter, driven by a decline in footwear and apparel sales.
Despite these near-term challenges, Hill remains optimistic about the long-term success of Nike’s restructuring strategy. These strategic changes are expected to help Nike regain market share and improve its financial performance in the future.
Is Nike Stock a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on NKE stock based on 16 Buys and 14 Holds assigned in the past three months. At $89.96, the average Nike price target implies a 16.68% upside potential. Shares of the company have declined 27.77% year-to-date.
