Nike and Dick’s Sporting Goods are likely to struggle near term as the footwear market weakens, according to Truist Securities. The bank downgraded both the apparel giant and Foot Locker owner to hold from buy. It lowered its price target on Dick’s to $135 from $270, suggesting nearly 9% upside from Tuesday’s close. Truist also cut its target on Nike to $42 from $47, or 6% above the price at which shares last closed. “We were previously more optimistic … but we now see headwinds as too severe,” analyst Joseph Civello said Wednesday in a note to clients. The downgrades come after shares of Dick’s plunged nearly 31% on Tuesday following its weaker-than-expected report for its fiscal second quarter. That marked the stock’s worst day ever . The analyst noted that Dick’s and Nike’s businesses are tied to one another, with Nike-branded shoes making up roughly 35% to 40% of the former’s merchandise purchases. DKS 5D mountain DKS 5-day chart As a result, Nike’s struggle to capture customers and a retreat from brick-and-mortar stores, among other factors, could hurt Dick’s, he said. “If Nike’s (NKE, Buy) future product launches fail to drive consumer demand, DKS would likely face incremental headwinds,” Civello wrote. The analyst added that the market for sportswear, broadly, remains crowded and disjointed, which could pose challenges to the firms’ bids to improve their businesses and boost their stocks. “The sporting goods industry is highly competitive and fragmented,” Civello wrote. “Potential industry pricing pressure and loss of market share due to increased competition could reduce sales and margins, especially if industry-wide inventories remain elevated.” Truist’s call on Nike falls in line with consensus on the Street. Of the 42 analysts covering the footwear stock, 24 have a hold rating on it, LSEG data shows. However, the bank’s call on Dick’s goes against consensus. Just nine of the 29 analysts that cover the stock have a hold on it, according to LSEG. Shares of Nike have shed 38% year to date. Dick’s was last down 37% over the same period.
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Wednesday, August 26
