Market Overview

Here's Why Nike Has 'Lost A Bit Of Its Magic'

Share:
Here's Why Nike Has 'Lost A Bit Of Its Magic'
Related NKE
Showtime Returns? Lonzo Ball Helps Put Lakers Back In The NBA Spotlight
Just Not Doing It: Look For Nike Shares To Trade Range Bound Ahead Of Investor Day
Nike Leads Dow Futures Lower; This Cloud Leader Spikes (Investor's Business Daily)

Many Wall Street analysts believe Nike Inc (NYSE: NKE)'s earnings report signaled that the company is undergoing a rough period in the North American market. The line of thinking continues: It will be short-term in nature, however, as the level of innovation remains strong with a compelling pipeline.

Unfortunately for Nike, based on the stock's recent weakness, this view isn't universally shared, and Nike may have "lost a bit of its magic," according to Gadfly's Sarah Halzack.

After being so strong for so long, it may have been inevitable for Nike's status as the undisputed No. 1 player in the athletic apparel sector to face some pressures, Halzack argued. There were plenty of signs of this in the company's earnings report, including a 3-percent dip in North American sales and a companywide decline in gross margins.

While some investors would attribute Nike's North American weakness to the decline in mall traffic, this isn't necessarily the case. The fact is, Nike's products just aren't selling — a thesis echoed by some of Nike's biggest partners, including Foot Locker, Inc. (NYSE: FL).

Related Link: Why The Nike Bull Thesis Actually Just Got Stronger

Foot Locker's CEO Richard Johnson suggested that some of Nike's Jordan basketball shoes are selling at slower rates, Halzack noted. In fact, the executive made it clear that his business is being hurt by the "absence of sufficient depth and breadth of exciting new styles in the premium athletic channel."

In other words, Nike's product line is not only "part of the problem," but "not as coveted and on-trend as it once was," she suggested.

Is Nike in any sort of dire trouble? No, especially when considering the company still expects to see a mid-to-single digit revenue increase for the full fiscal year. But there is no denying that Nike's products are no longer "consistently on-point" and investors could give the company the benefit of the doubt that its strategic plan will address its woes to deliver a longer-term fix.

"There's good reason to believe Nike can find its way out of this," Halzack concluded. "But it had better act fast, before a solvable problem metastasizes into something bigger."

Related Link: Analyst Sizes Up Nike, Finds A Buy Rating Still Fits

Posted-In: athletic apparelAnalyst Color Earnings News Guidance Sports Media General Best of Benzinga

 

Related Articles (FL + NKE)

View Comments and Join the Discussion!
Loading...

Partner Center

Loading...