Nike to see 'V-shaped recovery' over next year, analyst says

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Nike (NKE) stock continues to surge after the company posted better-than-expected fourth quarter earnings.
Randy Konik, Jefferies retail and apparel analyst, joins Market Catalysts to explain why he sees this as a turning point for Nike, with cleaner inventory, a reset strategy, and potential for earnings to rebound.
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Nike surging after fourth quarter results came in better than feared. The retailer topping estimates on the top and bottom line, despite seeing sales drop 12% year-over-year, saying this quarter saw the largest financial impact from its turnaround plan. Joining me now, we've got Randy Konik, who is the Jeffries Retail and Apparel Analyst. Randy, good to have you back on the program with us. You have a buy rating, $115 price target on this stock. So, there's got to be a lot of work done between here and there. You see this as an inflection point for Nike, though. Take us into your thesis.
Yeah, look, I think what the market under appreciates about this business is, and first and foremost, Nike is the second most ubiquitous brand in the entire world behind Coca-Cola. In addition, Nike competes with only 10 companies in athletic footwear. That's a great position to be in. And not only is it number it's number one in footwear, well, not a lot of competition. It also had self-inflicted wounds and those self-inflicted wounds incurred by prior CEO are now being fixed, fixed with better product, more balanced distribution. And because earnings got cut in half and a lot of these issues were self-conflicted, those earnings can bounce back rather quickly. It's not going to take a quarter, but over the next eight quarters, we think this this V-shape recovery ensues. And that's what makes this stock nearly double from current levels over the next 12 months.
So let's take this in pieces because there have been a couple elements of this turnaround strategy, and and I want to start with how they're looking across their partnerships, especially on the retail front. What have you been encouraged by? What would you like to see more of? How are you evaluating that?
Look, I think it's as simple as first and foremost, the company's getting back into the retail channel in an enlarging its wholesale distribution. Under the prior CEO, they went away from that. So the the new CEO is doing a good job of rebalancing that distribution. In addition, the company is really doing a good job of talking about being a better partner to the wholesale channel, not just taking, but also giving. So that means co-marketing with the partner, but also means doing a better job of segmenting product for each specific retailer, which I think is a very smart move. Finally, you know, with the uh with the return of going back on Amazon, I think it just helps the company broaden out its customer base. And again, it allows Nike to kind of, you know, because it's ubiquitous brand and people want to buy it everywhere, it allows the the brand to shine through in these different retailers, these different channels. Uh so everyone can get the new product that looks more compelling.
There's been a ton of focus around that product and the inventory levels of that product. Has your monitoring what the consumer trends are right now, especially across regions? And I believe it was EMEA that's actually showing the most strength and momentum for them right now. What do they need to see in terms of that inventory and and how they're kind of navigating those shifts internationally to ensure that they've got the right product in the right place at the right time?
Look, it's a great question. I think what the company is doing uh now is they're acting with urgency. So inventories ended the quarter uh in and about flat. Now, they did talk about some elevated inventories in particular regions and particular product categories like the lifestyle product, but what they did also say is they're they're doing a good job of getting through that product in a timely manner, such that from an inventory perspective, you should see inventories be very clean within the next couple quarters. Uh which allows for the back half of the fiscal year uh to be set up for a business that goes up against very easy comparisons on top and margin line to show some really meaningful improvement as we go out a couple quarters from now.