Nike (NKE) is taking the right strategic steps but execution is taking longer than expected due to industry lead times and the impact of the Iran conflict on recovery, RBC Capital Markets said in a note emailed Tuesday after investor meetings with company CEO Elliott Hill.

Early indications suggest that gross margins will begin improving in Q1 of fiscal 2027, which points to better pricing and sell-in discipline, RBC analysts said. They noted that the incentives have been set to revenue and margin targets, with the company tracking sell-in versus sell-out figures at the stock keeping unit level every week.

Nike has reviewed past investments as well as assessed the future investments required to execute on strategy, as it saw an opportunity to use operating leverage to raise margins into the double digits, according to the note. The current strategy includes a renewed focus on its Performance segment to reestablish credibility in the market, the analysts said.

The next catalysts that investors should look for are Nike's Capital Markets Day in November, which is expected to provide financial framework, an improving margin profile in H1 of fiscal 2027, and new lifestyle product launches in H2 of fiscal 2027, the analysts said.

RBC retained the company's stock rating at sector perform with price target at $45.

Price: 39.76, Change: -0.99, Percent Change: -2.43