Nike Earnings: Not Winning Now, but Early Stages of Turnaround Plan Encouraging; Shares Undervalued

Although wide-moat Nike reported large declines in sales and earnings in third-quarter fiscal 2025 (ended February), its results were better than expected and new CEO Elliott Hill outlined a solid plan to get the firm back on track. His “win now” plan includes actions to grow through wholesale partnerships, use e-commerce as a premium channel, increase product innovation, and strengthen ties to sports. The strategy is being implemented in all of Nike’s key regions. It will require some significant inventory cleanup and is unlikely to pay immediate dividends in a tough global sportswear market, but we had already anticipated this in our model. Thus, we do not expect to make any material change to our $112 fair value estimate and think there is an opportunity for patient investors. After an initial spike on the earnings report, Nike’s shares fell 5% during March 20 postmarket trading, likely due to the dim near-term outlook.