Nike has a 'catalyst-rich' next 6 to 12 months, says Neuberger Berman's Kevin McCarthy

Summary

• Nike's stock is down sharply (~10.5%) after the company warned of sales declines for the rest of the calendar year, indicating a non-linear turnaround taking longer than expected.
• Weak sell-through in Europe, Middle East, and Africa requires promotions to clear inventory over the next 1-2 quarters, impacting near-term performance.
• China sales declined 7% last quarter and are expected to worsen before improving due to a fast fashion cycle and hyper-competition from local companies; this will be a top-line headwind for about a year.
• Stock is bidding below $50.48; fiscal 2027 has been derisked, with margins anticipated to recover before the top-line inflects, likely by spring 2027.
• Key catalysts over the next 6-12 months include lapping $2.5 billion from tariff inventory purge and Nike reset, and the launch of full sport offense products.
• Past mistakes alienated wholesale partners and over-relied on legacy lifestyle brands (up to ~50% of mix), but current actions focus on reengaging partners and innovating in performance areas like running and football.
• Upcoming events include an investor day, World Cup, and expansion of the SKIMS apparel line, adding to the catalyst-rich period.
• The Nike brand is not fundamentally weaker, but repositioning is needed in competitive markets like China through skew rationalization.
• The next 6-12 months are catalyst-rich, making Nike a more topical stock for investors to monitor as conversations become more constructive.