Rick Ducat
Chartered Market TechnicianCan Nike (NKE) Show Turnaround Results in 1Q27 Earnings?
Rick Ducat
Chartered Market TechnicianNike (NKE) reports earnings postmarket Thursday with a difficult backdrop.
The beleaguered athletic apparel company’s turnaround efforts have coincided with a 51% decline from the stock’s 52-week high of $76.97 on Oct. 2, 2025, to yesterday’s close of $35.40. Analysts are looking for fiscal first quarter 2027 earnings per-share of $0.43 against last year’s figure of $0.49 (-12.2%) and for revenue of $11.40 billion vs. $11.72 billion in the same time frame (-2.72%).
CEO Elliott Hill, a longtime Nike insider, assumed leadership in October 2024 and quickly began sweeping changes through the company centered around “Sport as our North Star.” The plan included moving away from lifestyle apparel and clothing to refocus on performance sportswear and athletics, as well as rebuilding wholesaler relationships and reducing excess inventory among other things. However, these efforts may be progressing unevenly as the brand faces headwinds, such as longer-term weakness in China and aesthetic challenges such as the highly visible puckering/bulging shoulder seams on jerseys during the 2026 World Cup.
Here are things to consider as Nike heads into earnings:
Tariff Sensitivity:
The apparel space has faced price and margin pressure recently as one of the industries most heavily affected by higher costs resulting from tariffs imposed through President Donald Trump’s trade policy changes. In the United States, about 97% of all the clothing and shoes purchased are imported from other countries, according to a 2024 report from the American Apparel & Footwear Association. Top exporters include China, Vietnam, and Bangladesh. Shares of athletic apparel companies have seen significant declines since the announcement of major new tariffs on April 2, 2025, including Nike (-45.5%) as well as Lululemon (LULU, -66.0%), Under Armour (UAA, -34.1%), Adidas (ADDYY, -31.5%), and On Holdings (ONON, -34.1%). Traders should be aware of any tariff developments, which could be a major risk factor.
Global Challenges:
Greater China has been a major concern, with sales declines expected to persist into fiscal 2027 as the company continues marketplace cleanup efforts and reduces sell-in levels. NIKE Direct has been struggling with weak digital demand and heavy discounting, limiting profitability improvements. Meanwhile, weakness in Sportswear, a highly promotional EMEA market, and the prolonged turnaround at Converse have been adding volatility to the company’s performance.
Bearish Analysts:
The Street has taken a more pessimistic view of Nike. Most recently, RBC Capital analysts on Sept. 29 cut its price target to $40 from $45 and kept its Sector Perform rating on shares, saying they do not expect an earnings miss but expressed concerns about guidance. Several other firms also lowered targets on Sept. 28 with a general theme of wariness heading into earnings due to slower-than-expected turnaround efforts and weak sales. Price target cuts came from HSBC ($40 from $48, kept Hold), Deutsche Bank ($37 from $45, kept Hold), and Piper Sandler ($38 from $45, kept Neutral). However, perhaps the most negative news came Sept. 25 from Bank of America, which downgraded shares to Underperform from Neutral with a target reduction to $30 from $47.
Options Market:
The options market shows a potential implied move of +/-$2.80 (7.9%) for the weekly Oct. 2 expiration Friday, which if to the upside, would not put it far beyond the recent short-term, range-bound trading between about $35 to $37 and if to the downside, could place it near a lower boundary near $32.45. Meanwhile, the Oct. 16 monthly contract range shows a potential implied move around +/-$3.50 (9.9%).
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