The Numbers That Matter
Nike closed Friday at $35.75, down 0.67%, after Bank of America downgraded it to Underperform from Neutral. The stock is down about 47% over the past 12 months.
BofA now expects Nike's sales to shrink through all of fiscal 2027. It had previously expected a turnaround this spring. It cut its EPS estimates for fiscal 2027 and 2028 by 11% and 12%.
Nike's dividend payout ratio is now above 100%, meaning it pays out more than it earns, BofA warned.
Nike reports fiscal first-quarter results Thursday, October 1, after the close. Wall Street expects about $0.44 a share on roughly $11.45 billion in revenue.
It's one of the busiest weeks of the year: PCE inflation and Micron on Wednesday, ISM manufacturing on Thursday, and the September jobs report on Friday.
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A Downgrade With a Deadline
Analysts usually downgrade a stock after bad news. Bank of America did it four trading days before Nike's report, which is a bold call.
"Risks are rising," analyst Lorraine Hutchinson wrote Friday. She said Nike's new products "continue to be overshadowed by a pressured classics business." That's the Air Force 1s, Dunks and Jordans that paid Nike's bills for a decade and are now selling slower.
Her new estimates are harsh:
Sales growth negative through fiscal 2027, instead of the spring rebound she had expected
Fiscal 2027 EPS 14% below consensus
North America wholesale sales falling from the second quarter onward, after that business grew 14% in fiscal 2026. Sales to shoppers are running behind what Nike has shipped to stores
A tougher "China reset", with Nike's cutback on partner online sales likely to force promotions through the second quarter
BofA isn't alone. Five analysts have downgraded Nike since the start of August. Of the 44 who cover it, 26 now rate it a hold, according to LSEG. Earlier this month, UBS said its industry checks show Nike's "global sales growth trend has deteriorated over the last 3 months."
The Dividend Problem
Income investors should look closely at this one.
Nike has been treated as a safe blue-chip dividend payer for years. A payout ratio above 100% means the company is paying more in dividends than it earns. A company can do that for a while from cash on hand, but not forever. If profits don't recover, the choice becomes borrowing to fund the payout or cutting it.
Nike hasn't said anything about cutting. But BofA lowered its income rating on the stock for exactly this reason. When a sell-side analyst starts flagging dividend risk, it's usually because they've done the math.
There is one bright spot. BofA estimates Nike's effective tariff rate has fallen to 10%–12.5%, from about 20% a year ago. That helps margins. It doesn't help if customers aren't buying.
Why Nike Is Really a Story About the Consumer
The Nike call matters because of when it landed.
The same morning, the University of Michigan said consumer sentiment had dropped to 48.1, and that Americans expect 4.6% inflation over the next year. Earlier in the week, McDonald's told investors traffic was flat and blamed "the environment." As we noted last week, the S&P 100 traded sneakers for a memory chip.
Money is leaving brands that need a confident shopper and moving into companies selling to AI data centers. Nike and Micron report within 24 hours of each other this week, and they sit on opposite sides of that split.
The Week Ahead
Monday, Sept. 28: Dallas Fed manufacturing survey. Richmond Fed President Tom Barkin speaks.
Tuesday, Sept. 29: Conference Board consumer confidence and August JOLTS job openings. Australia's central bank is widely expected to raise rates.
Wednesday, Sept. 30: the big day. - August PCE inflation, the Fed's preferred gauge. Economists expect headline prices up 0.4% for the month and core prices up 0.3%, with core rising to 3.4% year over year from 3.3%. - ADP private payrolls and the final Q2 GDP estimate. - Micron (NASDAQ: MU) after the close. Micron guided to $49–$51 billion in revenue and $30–$32 in adjusted EPS, with gross margins near 86%. A year ago it earned $3.03 a share on about $11.3 billion in sales. The options market is pricing a move of roughly 9% either way. - The third quarter ends, so expect some end-of-quarter repositioning by fund managers.
Thursday, Oct. 1: ISM manufacturing, weekly jobless claims and Nike after the bell.
Friday, Oct. 2: The September jobs report. After August's 162,000 gain, forecasts range from about 50,000 (Capital Economics) to about 100,000, with unemployment seen at 4.1%–4.2%. It's the last jobs report before the Fed's October 28–29 meeting, and markets are split on whether the Fed hikes again. The last hike already landed, and a hot PCE print and a solid jobs number could make a second one hard to avoid.
Where the Tape Closed
Friday's final numbers: The S&P 500 rose 0.51% to 7,743.41, the Dow gained 0.93% to 51,828.62, and the Nasdaq added 0.48% to 27,068.72. The 10-year Treasury yield ended near 5.17%. Oil fell after Iran proposed a seven-day plan to reopen the Strait of Hormuz, with WTI at $92.44 a barrel, down 2.29%.
What Lands Next
Nike walks into Thursday with a lot of doubt already priced in. The stock is down about 42% this year, and five downgrades in two months have pushed expectations down. Sometimes that sets up a relief rally. Sometimes it means the analysts were right early.
Either way, what Nike says about North American wholesale, China and the dividend will say as much about the American shopper as Friday's jobs report. The market will hear from Micron, which sells to data centers, and from Nike, which sells to consumers, within about 24 hours of each other, and it will price both.
This article is for informational and educational purposes only and does not constitute investment advice or a recommendation to buy or sell any security.
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