Nike's (NKE) latest quarterly results reinforce the view that the company's turnaround will take time, as improving margins and cost controls continue to be offset by a slower-than-expected sales recovery, UBS Securities said in a Tuesday note.
Management cut its fiscal 2026 sales outlook amid continued weakness in its fashion business and planned inventory reductions. However, UBS said 5% growth in the performance business and improving execution across additional sports categories could support future sales growth.
UBS said Nike maintained its earnings outlook by raising its gross margin forecast and lowering its SG&A expense expectations despite weaker revenue, but warned that prolonged cost restraint could lead to underinvestment and eventually require higher spending to support sustainable sales growth.
UBS said lower inventories and disciplined promotions should support gross margins, though it expects revenue pressure to persist beyond the first quarter as Nike laps major sporting events and promotional activity.
UBS maintained its Neutral rating on the stock and lowered its price target to $48 from $50.
Nike shares were up 4.1% in Wednesday trading.
Price: $42.57, Change: $+1.52, Percent Change: +3.70%