By Sabrina Escobar

Nike's fiscal fourth quarter could be a rough one.

Earnings, which come out Thursday after the market closes, probably will take a beating from the drastic measures new CEO Elliott Hill is taking to turn the sneaker maker around, analysts said.

Still, a few on Wall Street are hopeful that Nike will put the worst behind it as it closes out its fiscal year and Hill's initiatives start taking effect.

For Jefferies analyst Randal Konik, Nike has hit bottom and is primed to recover.

"F'4Q should mark the trough for fundamentals as NKE continues to purge excess inventory and streamline the marketplace," Konik wrote in a note on Tuesday.

"With F'26 expectations already muted, a soft outlook is already priced in. We're seeing progress on inventory cleanup, innovation, and wholesale partnerships, our key focus areas," he added.

Konik, who has a Buy rating on the stock, acknowledged that fourth-quarter results "will be painful."

Analysts polled by FactSet are projecting Nike's sales will drop about 15% year over year, to $10.7 billion. Store visits have been declining for eight straight months on a year-over-year basis, according to foot traffic data from Placer.ai.

The forecast for earnings is 13 cents a share, compared with $1.01 recorded in the year-ago quarter.

The earnings outlook reflects how Nike has heavily discounted its products to clean out inventories and start fresh with new styles -- one of Hill's many turnaround initiatives.

Nike's chief financial officer, Matthew Friend, made clear this spring that the fiscal fourth quarter was where Hill would make his mark.

"Q4 will reflect the largest impact from our WinNow actions and that the headwinds to revenue and gross margin will begin to moderate from there, " Friend said on the company's third-quarter earnings call in March.

Other efforts include fixing relationships with wholesale partners that were severed under prior CEO John Donahoe, and investing on sports-centric innovation.

Hill is also shaking up the company's management team.

Since October, Nike has promoted or hired just under a dozen high-ranking employees across the company in what TD Cowen analyst John Kernan calls the sector's "most comprehensive" senior management changes in decades.

While Hill's vision should revitalize Nike in the long run, the company "faces several structural profit headwinds as the transformation takes place," wrote Cristina Fernández, an analyst at Telsey Advisory Group.

Fernández, who rates the stock Market Perform, also warned that Nike is exposed to tariffs given that most of its shoes are produced in Asian countries.

That said, there are nascent signs that things aren't as bad as they seem.

Nike said it would increase prices on certain items, particularly footwear priced over $100, which could help offset some of the tariff impact. And the number of customers coming into company's brick-and-mortars is looking up: Foot traffic was down just 3.2% in May, compared with 8.2% in March and 10.2% in April.

Web traffic is better, too, and consumers are reacting well to new product launches like the new Vomero 18 and Pegasus Premium running shoes, Raymond James analyst Rick Patel noted.

"This supports the notion that the worst of NKE's sales declines has passed," Patel wrote in a note Monday. He rates Nike stock Market Perform.

Today's earnings report could go a long way toward confirming or dismissing the notion.

Although the company stopped providing full-year guidance last October -- a practice that probably won't change -- any upbeat commentary about the current quarter or the turnaround process could go a long way toward giving the stock a boost.

And indeed, the bar is low for Nike headed into earnings. The stock is down 20% this year and has dropped 35% over the past 12 months.

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

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June 26, 2025 03:30 ET (07:30 GMT)

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