By Sabrina Escobar

Nike's fiscal third-quarter earnings report will be another test of new CEO Elliott Hill's plans to turn the business around. Investors would do well to remember that overhauls take time.

Nike reports its results Thursday afternoon. The consensus call among analysts polled by FactSet is that the company will post adjusted earnings of 30 cents from $11 billion in revenue.

Krisztina Katai, an analyst at Deutsche Bank, is expecting sales will be modestly above expectations, while earnings fall a bit short as a result of higher markdowns the brand has had to take to clear out older inventory. That said, she is still upbeat about the company and the stock's prospect.

"While we acknowledge the concerns, we walk into 3Q cautiously optimistic that shares have bottomed," wrote Katai. "Furthermore, our channel checks revealed several green shoots emerging with what appears to be strong consumer interest in recent running shoe launches."

Shares of Nike closed 0.5% lower at $72.99 Wednesday. The stock is down 3.6% this year, roughly in line with the S&P 500's 3.5% decline. It has fallen 27% over the past 12 months, while the index is up 8.6%.

Tom Nikic, an analyst at Needham, also thinks the stock has found a floor, but he predicts the company will continue to struggle in the first half of the year as Hill's new initiatives start to take shape.

"Management is clear-headed about the mistakes they've made, and are working aggressively to correct them," Nikic wrote. "We believe Nike has the potential to be a compelling 'story stock in 2025, especially if numbers find a bottom and investors latch on to Mr. Hill as Nike's proverbial white knight."

Nike's sales have struggled in the postpandemic years. A series of missteps, such as cutting ties with wholesale partners and relying on sales of popular styles instead of innovating, have caused the company to lose market share.

Hill's efforts aim to rectify those errors. On top of clearing out old styles, Nike is also planning on investing in marketing and product innovation, and rebuilding partnerships with wholesalers.

Investors will be looking for more updates from Hill and the rest of the management team. It is likely that he will emphasize he has been making since taking over last fall: Successful turnarounds take time, money, and patience.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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March 20, 2025 03:30 ET (07:30 GMT)

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