Key Points
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Analysts are lowering their price targets ahead of Nike's earnings report Thursday.
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Nike is also set to launch Caitlin Clark's signature shoe this week.
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If the Caitlin 1 is well-received, it could help drive Nike's long-awaited comeback.
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Nike's (NYSE:NKE) running business may be on the rebound, but the sportswear giant is definitely limping into its first-quarter earnings report, due out on Thursday.
The stock is trading around decade lows heading into the big reveal, and Wall Street is lowering its expectations for a comeback. Last Friday, Bank of America downgraded the stock to underperform and lowered its price target from $47 to $30 due to downside risks to earnings over the next two years. Three other analysts slashed their price targets on the stock on Monday as well, reflecting Nike's decline over the last few months as hopes for a turnaround get pushed further out.
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Nike told investors that gross margin should begin to inflect in the first quarter after years of challenges, as the company moves past tariffs and benefits from streamlining its inventory, but it's clear the broader industry is struggling. Lululemon just posted dismal results in its earnings report earlier this month, and Deckers and On Holdings are trading down significantly from recent highs on slowing growth as well.
Consumers have been hit hard by inflation and are pulling back on spending in some discretionary categories like apparel and footwear. Additionally, China has become a challenging market for global brands like the ones above. Those issues will only make it harder for Nike to deliver a recovery even if it executes well.
Analysts are expecting the company to report a 3.3% decline in revenue to $11.33 billion and for earnings per share to decline from $0.49 to $0.44.
That arguably creates a low bar for the company to overcome, but it also shows that the business is still declining.
However, there's another Nike event this week that could be the catalyst long-term investors are looking for.
Caitlin Clark's signature shoe is finally dropping
After years of waiting, Nike is finally releasing Caitlin Clark's first signature shoe.
Clark has brought a new audience to women's basketball and the WNBA, and along the way, has reached a degree of fame that arguably no other women's athlete in a team sport has before her.
Nike won the battle to sign Clark, but has done relatively little to market her since, squandering the buzz she brought with her from college to the WNBA.
However, Clark's shoe is now set to be released on Thursday, the same day as the earnings report, and initial demand could say a lot about Nike's ability to leverage star power and to build a new franchise. The moment seems even more important after Nike lost French soccer star Kylian Mbappe to On earlier this month.
The shoe features interlocking Cs, a personal flourish reminiscent of the "Jumpman" Air Jordan logo, and Nike said the shoe is built "for the speed, range an unpredictability of her game." According to Clark's direction, the shoe achieves a quicker first step, faster step-back, and a faster shot release.
The sneaker release will include an 18-piece apparel collection featuring hoodies, jackets, and t-shirts. Nike is also debuting its new Opticast innovation, a specially design upper part of the shoe that supports lateral quickness.
Could the Caitlin 1 spark a turnaround for Nike?
Nike's sports empire is vast and sprawling, and there's more than one area that needs improvement.
However, the Caitlin Clark partnership could be uniquely beneficial for Nike. Nike already dominates basketball, giving it much-needed credibility, and the Clark partnership comes up at a time when women's sports are ascendant.
For Nike, Clark has the potential to do for the women's side of the business what Jordan did for the men's side, and her brand is sure to have crossover appeal with men as well.
Look out for Nike's commentary on the shoe launch when it reports earnings. We may have to wait a few weeks to get any kind of numbers on the launch, but some positive news could be just what Nike needs to get going in the right direction.
If the business ever does turn around, there's a lot of upside potential for this blue chip stock, now down 80% from its peak.
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Bank of America is an advertising partner of Motley Fool Money. Jeremy Bowman has positions in Bank of America, Lululemon Athletica Inc., and Nike. The Motley Fool has positions in and recommends Deckers Outdoor, Nike, and On Holding. The Motley Fool recommends Lululemon Athletica Inc. The Motley Fool has a disclosure policy.