JPMorgan analyst Matthew R. Boss flagged several troubling signs for Nike Inc NKE, which may have investors tightening their seatbelts.

Boss maintains a neutral rating with a price target of $77 for December 2025 on Nike stock. His insights from the filing reveal potential challenges that could impact Nike’s growth trajectory.

Ominous Omission: Supply Chain Concerns

A significant red flag Boss noticed in Nike’s latest 10-Q filing is the absence of the “Supply Chain Conditions” reference, a staple in previous quarterly filings. This omission suggests a departure from previously reassuring statements about inventory health.

Boss points out that while Nike reported a 5% decline in inventories, revenues fell by 10%, indicating a widening gap that investors should watch closely.

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New ‘Marketplace Management’ Factor: A Shaky Shift

Nike introduced a “Marketplace Management” factor, indicating a strategic pivot to balance product distribution between direct operations and wholesale partners.

However, this shift comes on the heels of disappointing first-quarter results, with traffic declines across both Nike Brand Digital and physical stores.

Boss warns that the competitive environment is fierce, and the company’s ability to regain market share could be jeopardized.

Greater China: The Weak Link

Nike’s performance in Greater China represents a significant concern. With comparable store sales down 8% in the first quarter, this region is facing intense competition from local brands.

As Boss notes, the company is struggling with declining unit sales across its key categories, including a 10% drop in footwear and a 12% drop in apparel. This underperformance signals an urgent need for Nike to rethink its strategy in one of its most critical markets.

Margin Compression: A Looming Threat

In addition to declining sales, Nike’s gross margins are under pressure. Management revealed a rise in inventory obsolescence reserves, particularly in Greater China, which contributed to a 60bps decline in gross margins.

As promotional activities ramp up to clear excess inventory, Boss highlights the need for vigilance, as the company’s gross margin guidance indicates a potential 150bps decline year-over-year for the second quarter.

Proceed With Caution

With these red flags waving, investors should be cautious. Nike’s path forward will depend heavily on how well it navigates these challenges in the upcoming quarters.

As Boss emphasizes, in this evolving landscape, execution will be critical for maintaining growth for Nike.

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