MW Nike's turnaround is showing signs of working as pressure from rivals eases, analyst says

By Bill Peters

TD Cowen says margin rebound for Nike is 'underappreciated' and sees limited risk from 'de minimis' halt

The Nike logo is seen at a shopping mall in Hanoi, Vietnam.

Nike Inc. faces no shortage of concerns about competition and tariffs, but one analyst on Wednesday said the sneaker and athletic-gear maker might be turning the corner on both.

TD Cowen analyst John Kernan, in a research note Wednesday, said consumer interest had ticked higher for Nike $(NKE)$ and its Jordan brand, while slipping for other brands that have taken sales away from the company over the past three years - like Adidas (XE:ADS) (ADDYY), Saucony $(WWW)$, Skechers $(SKX)$, Asics (JP:7936) $(ASCCY)$ and New Balance.

Kernan also noted that risk from the end of the so-called de minimis exemption - which allowed items under $800 to flow into the U.S. duty-free - was "contained." He cited as positives recent management changes, less discounting at Foot Locker $(DKS)$ stores and Nike's efforts to sell off its backlog of unwanted shoes. And he said a margin recovery by the company was "underappreciated" by Wall Street analysts.

"Our preference-share data suggests, in our view, that share is stabilizing under [Nike Chief Executive Elliott] Hill, and even showing signs of increasing sequentially for Nike brand, as Jordan brand is undergoing the most marketplace cleanup," Kernan wrote.

He said that Nike's margins were at a "trough," and said it could eventually earn more than $4 a share, with $6 billion in free cash flow. Kernan added that he expects Nike to return to sales growth in its fiscal fourth quarter, when factoring out foreign exchange.

All of that led TD Cowen to upgrade Nike's stock to a buy, from hold. Shares were up 0.6% on Wednesday, although they're still down 2.2% so far this year.

Nike's stock got a lift in June after investors found its first-quarter outlook more encouraging, after a few years of waning consumer demand due to cost-of-living increases. During that month, Jefferies analyst Randal Konik, in a note, observed that the "bottom is in," adding: "Just buy it."

Nike has been trying to offload its surplus of unwanted Dunks and Air Force 1 shoes - after flooding the market with those more casual sneakers - while redoubling its focus on athletes and turning its e-commerce channels into a destination for premium, higher-priced gear. And as U.S. tariffs take hold, the company, which has relied heavily on factories in Asia to make its shoes, has said it plans to rely less on China for production.

As for the de minimis exemption, which spurred international e-commerce, Kernan said that Nike - unlike companies such as Lululemon Athletica Inc. $(LULU)$ - was likely not using Mexico or Canada to ship to the U.S.

"Our conversations across the supply chain and public information lead us to believe Nike is not shipping into the U.S. from Mexico or Canada despite having [distribution-center] infrastructure to potentially do so," Kernan wrote.

In terms of senior-level staff changes, Kernan also counted four "rejoins" at the company, including Hill, and seven internal promotions since around October, when Hill became CEO. Hill himself had worked at Nike for more than three decades before returning.

"The team moves that Mr. Hill enacted represent a wide array of roles being addressed but all cumulatively reflect the goal of accelerating innovation, execution and growth," Kernan said.

-Bill Peters

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September 10, 2025 15:28 ET (19:28 GMT)

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