The retail industry is constantly shaped by evolving consumer behavior and macroeconomic shifts. Companies that adapt and reinvent themselves often come out on top. In light of this, as we move further into 2025, analysts are spotlighting two iconic names, Nike and Gap , as must-watch players in the retail rebound story.
In a recent interview featuring a panel of retail experts, including BMO Capital Markets’ Managing Director and Senior Analyst Simeon Siegel and Barclays’ Consumer Discretionary Senior Analyst Adrienne Yih, the spotlight was firmly on the 2025 outlook for the industry. Among the key takeaways, Nike and Gap stood out as top picks for a retail resurgence. The experts dissected what’s next for retail, with Siegel pointing to Nike’s rebound potential under the leadership of new CEO Elliott Hill.
While he acknowledged the road ahead won’t include a quick or seamless fix, Siegel highlighted Nike’s unrivaled marketing prowess, boasting the largest budget in the industry. He noted that when Nike aligns its strategy with the right products, its ability to captivate consumers through compelling storytelling is unmatched. With Hill at the helm, the company seems poised to leverage its strengths and chart a course back to dominance in the retail landscape.
Analyst Adrienne Yih highlighted Gap’s promising future this year under CEO Richard Dickson, who took the reins in August 2023. She drew comparisons to the company’s golden days under former CEO Mickey Drexler, praising Dickson’s brand-first, merchant-driven approach. Yih’s confidence in Gap’s multi-year turnaround highlights the potential for sustained growth.
Retail Stock #1: Nike
Nike reigns as the world’s premier designer, marketer, and distributor of authentic athletic footwear, apparel, equipment, and accessories, catering to a diverse range of sports and fitness activities. The company unites the powerhouse brands of Nike, Jordan, and Converse.
Commanding a market cap of roughly $106.5 billion, the stock appears to be under pressure, notably trailing the broader S&P 500 Index's ($SPX) gains over the past year. Despite its dominance in the global retail landscape, the stock has posted a negative return of nearly 29.5% over the past year.
On Jan. 2, Nike delighted its shareholders with a quarterly dividend of $0.40 per share, marking an 8% increase from the previous quarter’s rate of $0.37 per share. This dividend payment also represents Nike's 23rd consecutive year of raising its dividend. Its annualized dividend of $1.60 per share offers an enticing 2.2% yield.
However, Nike isn’t just about dividends when it comes to rewarding its investors. In fact, the company’s latest earnings reveal that it returned a stellar $1.6 billion to shareholders, including $557 million in dividends and $1.1 billion in share repurchases. As of Nov. 30, Nike had repurchased shares worth approximately $11.3 billion, further demonstrating its commitment to returning value to investors.
Last month, the retailer released its fiscal 2025 second-quarter earnings report, which surpassed Wall Street’s expectations on both the top and bottom lines despite a dip in revenue and profits due to heavy discounting. The company’s revenue shrank almost 8% year over year to $12.4 billion, just edging past analyst forecasts. EPS also took a hit, falling 24% annually to $0.78 but still crushed Wall Street’s forecasts by a solid 23.8% margin.
During the quarter, Nike registered a 13% year-over-year drop in sales across both its stores and online platforms, while wholesale revenues declined by 3% annually. The company’s aggressive discounting strategy led to a 100-basis point decline in gross margin, bringing it to 43.6%. Nevertheless, despite these challenges, management remains highly optimistic.
While reflecting on the Q2 performance, CEO Elliott Hill emphasized that the company’s top priority is to put sport at the heart of everything it does. Hill outlined plans to reposition the business and reignite long-term shareholder value. Hill is confident that Nike will soon deliver more moments that showcase the brand’s true spirit, signaling a strong return to its roots.
CFO Matthew Friend noted that the company’s Q2 financial results were largely in line with expectations as they continue to shift their portfolio. He further added, “Under Elliott's leadership, we are accelerating our pace and reigniting brand momentum through sport."
Wall Street also appears optimistic about NKE stock, with a consensus “Moderate Buy” rating overall. Of the 33 analysts offering recommendations, 15 advise a “Strong Buy,” one gives a “Moderate Buy,” 15 recommend “Hold,” and the remaining two suggest a “Strong Sell.”
The average analyst price target of $84.17 indicates 17% potential upside from the current price levels, while the Street-high price target of $120 suggests that NKE could rally as much as 66.7% from here.
Retail Stock #2: The Gap
Gap is a powerhouse of iconic brands, including Old Navy, Gap, Banana Republic, and Athleta. These beloved brands offer a wide range of clothing, accessories, and lifestyle products for men, women, and children.
With a global footprint, Gap’s products are available through company-operated stores, franchise locations, and online platforms, making it a household name around the world. Valued at a market cap of approximately $9.1 billion, shares of this retailer are up roughly 14.3% over the past year. Plus, over the past three months alone, the stock has returned almost 15.2%, outshining the broader SPX’s just 4% gain during the same time frame.
On Nov. 12, the company declared a quarterly dividend of $0.15 per share, set to be distributed to its shareholders on Jan. 29. Its annualized dividend of $0.60 per share translates to an attractive 2.5% yield. With a conservative payout ratio of 27.33%, Gap leaves ample room for further dividend enhancements.
Following the company’s Q3 earnings report disclosed on Nov. 21, which soared beyond Wall Street’s top- and bottom-line projections, shares of Gap took off more than 12% in the subsequent trading session. Gap reported net sales of $3.8 billion, marking a 2% increase compared to last year and slightly surpassing Wall Street's projections. Additionally, EPS soared 24.1% year-over-year to $0.72, blowing past estimates by a remarkable 28.6%, further fueling investor optimism and signaling strong momentum for the retailer.
During the quarter, Gap experienced a 2% decline in in-store sales compared to the previous year, but the company’s global footprint remains strong, with 3,603 store locations across nearly 40 countries, including 2,544 company-operated stores. Online sales saw a 7% increase year-over-year, now representing 40% of the company's total net sales.
The retailer wrapped up the quarter with a strong cash position, boasting cash, cash equivalents, and short-term investments totaling $2.2 billion, a 64% increase from the previous year. Reflecting on the Q3 performance, CEO Richard Dickson said, "I'm proud that Gap Inc. delivered another successful quarter, growing net sales for the 4th consecutive quarter and gaining market share across all brands while meaningfully expanding operating margin.”
The CEO further emphasized that the success is a direct result of Gap's consistent execution of its strategic priorities, especially the brand reinvigoration efforts that are strengthening the business. Encouraged by strong YTD performance, management raised its fiscal 2024 outlook for sales, gross margin, and operating income growth. The company now expects net sales to grow by 1.5% to 2% for the year, while gross margin is projected to expand by around 200 basis points.
Operating income is also poised for impressive growth, with a targeted increase of 60%, reflecting the company’s successful execution of its strategic priorities and continued operational strength. Analysts tracking Gap expect the company’s bottom line to jump 41.3% year over year to $2.02 per share in fiscal 2024 and grow another 7% to $2.16 per share in fiscal 2025.
GAP stock has a consensus “Moderate Buy” rating overall. Out of the 18 analysts covering the stock, nine recommend a “Strong Buy,” one suggests a “Moderate Buy,” seven advocate “Hold,” and the remaining one gives a “Strong Sell” rating.
The average analyst price target of $27.78 indicates potential upside of 15.4% from the current price levels. However, the Street-high price target of $35 suggests that GAP could rally as much as 45.4%.
On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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