Nike shares remain a buy recommendation by Jefferies despite a difficult quarter

 Jefferies maintains its Buy rating and $115.00 price target for Nike (NYSE:NKE) despite expectations of a challenging fourth-quarter fiscal report.

The firm expects Nike's upcoming results to show significant pressure, with revenue projected to decline by double digits and gross margin falling by 400-500 basis points as the company works to address excess inventory. Jefferies estimates operating margin to decline by approximately 1,050 basis points and earnings per share to drop by around 85% compared to the previous year.

Despite these short-term challenges, Jefferies highlights several positive indicators supporting its optimistic outlook. Nike's foot traffic has increased over the past three months, growing 4.1% in May compared to 2.7% in April and 0.5% in March, indicating that the company's efforts to resolve inventory issues through factory stores are beginning to show results.

The company also highlighted the strength of Nike's product innovation, particularly in the running category with the Vomero and Pegasus models, which lead in average monthly search volume. Inventory declined 2% in the previous quarter, bucking the industry trend, as Nike made room for new products.

Jefferies noted that Nike's wholesale strategy changes under CEO Elliott Hill have strengthened relationships with key partners including Dick's Sporting Goods and Academy Sports, while its return to Amazon further expands the brand's reach.