Josh Brown says he's not sure if Nike can ever turn it around

CNBC PRO contributor Josh Brown of Ritholtz Wealth Management suggests Nike is not positioning itself for a successful turnaround, citing aging celebrity endorsements, increasing competition, and a 19% stock decline this year following a 30% loss in 2024. Nike's late March guidance indicated sales declines in the fiscal fourth quarter at the "low end" of the "mid-teens range," worse than anticipated, despite beating Wall Street expectations in its fiscal third quarter; the company also plans to raise prices amidst restructuring, tariffs, and sliding consumer confidence. While Nike relies on staple sneakers, competitors are forcing them to fight defensively in key markets.

Analysis

Nike (NKE) faces significant challenges in executing a successful turnaround, according to Josh Brown of Ritholtz Wealth Management, who notes concerns over its aging celebrity spokespeople, such as LeBron James and Michael Jordan, and intensifying competition. The company's stock reflects these headwinds, having fallen 19% year-to-date after a 30% loss in 2024, and is described as a 'falling knife' currently trading near an eight-year low. This underperformance persists even when Nike surpasses Wall Street's quarterly expectations, as seen in its fiscal third quarter, after which the stock, according to Brown, typically continues its downward trend within a week. Compounding these issues, Nike's guidance for its fiscal fourth quarter anticipates a sales decline at the 'low end' of the 'mid-teens range'—considerably worse than analysts expected—citing ongoing restructuring, potential tariff impacts, and sliding consumer confidence. While the company intends to raise prices and continues to leverage staple products like Air Force Ones and Jordans, Brown suggests these strategies may be insufficient to counter defensive pressures from newer brands in key markets such as running.

Key Decisions for Investors

• Investors should exercise extreme caution, acknowledging Nike's 'falling knife' stock performance and the substantial headwinds from entrenched competition, concerns over brand relevancy with aging endorsers, and macroeconomic factors like tariffs and consumer sentiment.
• Closely monitor Nike's forthcoming strategies for brand reinvigoration, particularly efforts to connect with younger demographics, develop innovative products beyond its legacy lines, and effectively defend or regain market share against agile competitors in critical growth categories.
• Scrutinize upcoming financial reports for the tangible impact of announced price increases on sales volumes and margins, as well as concrete evidence of progress from ongoing restructuring efforts, as these will be key indicators of any potential stabilization or further deterioration in the company's outlook.