By Martin Baccardax

Nike CEO Elliott Hill is about to mark one year on the job, and there are bets on Wall Street that gains from his turnaround strategy are about to pick up.

Hill, who took over from John Donahoe last October, has vowed to return the focus of the world's biggest athletic shoes and apparel brand back to sports and bricks-and-mortar sales after years of growth based on style and digital platforms.

But that message has been blunted by the impact of sweeping U.S. tariffs, which have exposed the group's global supply chain and its reliance on China.

Nike shares slumped nearly 35% between late February, when President Donald Trump announced tariffs on Canada, Mexico and the European Union, until early April, when he paused the bulk of those levies. The drawdown was more than double the decline of the S&P 500, highlighting the stock's sensitivity to tariff risks.

Nike stock has clawed back most of those losses, but is still down 13% since Hill's first day as CEO on Oct. 14, 2024.

That's probably because the tariff problem isn't going away.

Hill told investors earlier this summer that Nike will reduce its reliance on China-made shoes from roughly 16% of its total imports to a "high single-digit" percentage over its current fiscal year, which ends in May. The group will also "allocate production differently across countries to mitigate the new cost headwind."

Still, new tariffs on imports from China, as well as other U.S. trading partners, will probably add about $1 billion to Nike's overall cost base, Hill told investors.

That tally could be even higher, however, given that U.S.-China trade talks still haven't yielded an agreement. Levies on goods from other trading partners also edged higher under the new schedule created by Trump, which went into effect last month.

Nike has been cutting costs in anticipation of those duties, and unveiled its second round of job cuts this year in late August -- about 1% of its corporate workforce.

But layoffs and other cost reductions won't be enough to offset tariffs, said Lorraine Hutchinson, a Bank of America analyst who rate the stock Buy.

Nike, Hutchinson said, also needs a trend of positive sales trend to fully mitigate tariff costs.

That puts a floodlight not only on Nike's fiscal first-quarter earnings, due after the close of trading on Sept. 30, but on its near-term forecasts and broader holiday-quarter outlook.

Hutchinson expects first-quarter revenue of $11.06 billion, a 4.5% decline from a year ago but modestly firmer than Wall Street's $10.98 billion forecast. From there, she thinks Nike will provide sales guidance that suggest "mid-single-digit" percentage growth for the three months ending in November.

"Back to school trends in the U.S. were solid and we expect the same from Nike," she said. "A message of improving sales trends coupled with commentary that inventory is healthy in the channel and on track to be clean by the end of [November] would confirm our view that the recovery is progressing."

Hutchinson carries a price objective of $84 on Nike stock, implying a gain of around 15.5% from its current level.

RBC Capital Markets analyst Piral Dadhania lifted her price target by $14, taking it to $90 a share. She argues that Nike could get a $1.3 billion revenue boost from it sponsorship ties to next summer's FIFA World Cup.

Jay Woods, chief global strategist at Freedom Capital, is also bullish. He describes Nike as a "great turnaround story with Hill starting to put his stamp on the company."

Hill has said technical support for the stock is solid, and shares could soon break out of their 5-year downtrend. The company's fundamentals, particularly now that inventories are improving and tariff concerns are fading, are also positive.

"Risk/reward for someone looking to get into a longer term turnaround play is great as there is clear support, a good fundamental story and a lot to reverse in this iconic brand," Wood said. "So, so yes, it may be time for people who have been waiting to get into this name to 'just do it'."

Write to Martin Baccardax at martin.baccardax@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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September 22, 2025 11:10 ET (15:10 GMT)

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