MW Nike is succeeding in clearing inventory. That's one reason it's time to buy the stock.

By Ciara Linnane

Jefferies analysts are advising 'aggressively' buying Nike's beaten-down stock

Nike Inc. is succeeding in clearing excess inventory, is speeding up new product innovation and balancing its distribution - all good reasons to buy the stock, according to a Jefferies note published Thursday.

"Despite the tariff impact, we anticipate a V-shaped recovery in fiscal 2027 and recommend aggressively buying shares at these levels," analysts led by Randal Konik wrote in the note.

The team came away from a visit to Woodbury Outlets outside New York City after seeing "insane" traffic to the Nike store that was helping clear inventory, said the note. A security guard informed the researchers that weekends were even busier.

Nike's stock $(NKE)$ has been battered this year by President Donald Trump's tariffs on goods sourced from Asia. Nike's annual report shows that factories in Vietnam accounted for 50% of Nike-branded footwear production last year, as factories in Indonesia accounted for 27% and factories in China accounted for 18%.

China's tariff rate now stands at 145%; Vietnam's tariff rate is 46%; and Indonesia's is 32%. The stock is down 41% in the last 12 months, while the S&P 500 SPX has gained 5.1%.

Also read: How much Nike, Adidas and Puma source from Asian countries including Vietnam

Nike's store traffic inflected positive in March to 0.5%, according to Jefferies. That was a turnaround from a reading of down 15.3% in February and down 5.2% in January.

"Following last quarter's EPS call, management highlighted its strategy to leverage the factory channel to clear excess inventory. Our visit today confirms this approach is proving effective," the note said.

Nike had focused too heavily on lifestyle products in the last few years, particularly on its Air Jordan and Air Force 1 sneakers for men and women named AJ1 and AF1, as well as Nike Dunk footwear and fleece apparel, said the note.

"As the brand shifts back to its performance roots, we see outlets playing a key role in rebalancing Nike's product assortment," the analysts wrote.

The company's previous management team had deprioritized wholesale and slowed product innovation, allowing new competitors like Roger Federer-backed On Holding AG (ONON,) and Hoka to gain share in running. In lifestyle, meanwhile, Adidas (XE:ADS) and New Balance gained share with styles like the Samba.

"As Nike resumes its innovation flywheel, focusing on running, and improves relationships with retail partners, we expect an increase in allocation to Nike within wholesale," said the note.

Jefferies expects the company to be back on track by the holiday season, when other retailers are expected to be facing inventory insanity, as they lap high margins.

China will still buy Nike shoes despite Trump's trade war, the analysts wrote. A recent visit to Shanghai found consumers still planning to buy Nike products, despite all the rhetoric.

Nike's market cap of about $80 billion is above the brand's value at retail of close to $75 billion prior to this year's downturn, said the note.

"In addition, the price-to-sales ratio FY'2 currently sits at 1.8x, lower than previous troughs of 2.2x in 2020 and 2017. We see shares as attractively valued at these levels," said the note.

Jefferies has a $115 price target on Nike's stock, which closed Thursday at $55.76.

-Ciara Linnane

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April 18, 2025 10:19 ET (14:19 GMT)

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