Truist Securities has downgraded both Nike and Dick’s Sporting Goods to hold from buy, citing a weakening footwear market. The bank 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 last closing price.
“We were previously more optimistic, but we now see headwinds as too severe,” analyst Joseph Civello said in a note to clients. The downgrades follow Dick’s shares plunging nearly 31% on Tuesday after a weaker-than-expected fiscal second-quarter report, marking the stock’s worst day ever.
Civello noted the close ties between Dick’s and Nike, with Nike-branded shoes making up roughly 35% to 40% of Dick’s merchandise purchases. A 5-day chart of DKS highlights the recent volatility. As a result, Nike’s struggles to capture customers and its retreat from brick-and-mortar stores could hurt Dick’s. “If Nike’s future product launches fail to drive consumer demand, Dick’s would likely face incremental headwinds,” Civello wrote.
The sportswear market remains crowded and disjointed, posing challenges for both firms. “The sporting goods industry is highly competitive and fragmented. 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,” Civello added.
Truist’s call on Nike aligns with consensus; of 42 analysts, 24 hold a neutral rating. However, its stance on Dick’s goes against the majority, as only nine of 29 analysts hold a hold rating. Year-to-date, Nike shares have fallen 38%, while Dick’s has dropped 37%.
