If you have been paying attention to Nike lately, you might have noticed that something feels off about the company’s sales. Classic Jordans and other products like Air Force 1s are not appearing on store shelves the way they used to.
Their sneaker drops are also getting less attention than before. That’s because Nike has intentionally restricted the supply of its classic footwear to restore scarcity and balance the market.
All this has led to a drop in Nike sales, which is showing up in the company’s share price. On November 10, Nike (NKE) closed at $38.67. The stock went down 3% for the day and is roughly 40% lower this year.
That’s why some Wall Street firms don’t recommend buying the stock yet. Bank of America just warned investors to expect more pressure before the sneaker giant can recover.
In a BofA global research note shared with me, titled “Expect Investor Day to provide long-term optimism, but short-term caution,” analyst Lorraine Hutchinson maintained her Underperform rating on Nike and kept her price target at $24. That’s well below where the shares currently trade.
Why BofA still thinks Nike stock could drop further
Hutchinson has covered Nike at BofA for years. In her latest note on the stock, she cut her fiscal 2028 earnings forecast by 11% to $1.31 per share.
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She did that because Nike is still cleaning up Jordan Brand. The company is shipping fewer pairs to retail partners so that stores do not end up with piles of unsold boxes. The slow clean-up process is delaying the stock’s recovery across more quarters, but it also protects partners like Foot Locker from heavy markdowns, Yahoo Finance reported.
Due to the recovery delay, Hutchinson now expects Nike’s sales to return to growth in the third quarter of fiscal 2028 instead of the second.
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The lifestyle sneakers that just are not selling
Nike makes its money by selling shoes, clothing, and gear across performance sports like running and basketball. The company also has a large lifestyle business built on Jordan and classic silhouettes. That lifestyle side is where the business is hurting.
On Nike’s first-quarter fiscal 2027 earnings call transcribed by MarketBeat on Oct. 1, CEO Elliott Hill said Jordan Brand revenue fell by a mid-teens rate during the quarter. He also said that older Sportswear shoes had been stuck on store shelves for too long.
there's a lack of energy in the lifestyle space right now, which is impacting traffic
Even with the weakness in the lifestyle business, Nike beat Q1 earnings estimates by about 12%. However, the company’s reported revenue of $11.21 billion was below expectations. It went down 4.3% from a year earlier.
In addition, Nike experienced a 26% revenue drop on a currency-neutral basis in Greater China, which affected overall sales. Before the report, Nike was also removed from the S&P 100 index in September.
Can Investor Day give Nike stock a reason to rally?
Hopeful investors are now focused on Nike’s Investor Day on Nov. 16-17. During the event, Hill and new CFO Dave Denton will present PACE, a five-year plan to cut about $2.5 billion in costs by fiscal 2031, as Fox Business reported.
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Wall Street will be asking how much of that money will flow back into product and marketing, and how much will reach the bottom line. BofA believes the answer will decide whether Nike can return to a 9% or 10% operating margin, a level it held before this slump began.
When talking about the five-year plan, Hill asked for patience. “At our size and scale, meaningful change takes time,” he said on the earnings call.
Why the Nike dividend is now part of the risk
One of the main reasons some investors own Nike is its dividend. Nike’s dividend currently yields about 4.2%, and the company has raised that payout for 25 years in a row. So it is quite popular among income investors.
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But BofA sees a growing problem. Hutchinson expects Nike’s dividend payout ratio to reach 145% of earnings in fiscal 2027 and 125% in fiscal 2028. What that means is that she expects Nike to be paying out more in dividends than it earns.
In my view, the company might not be able to continue that for very long, and it could lead to a dividend cut if sales do not recover on time.
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