Market Overview

Baird Expects Nike To Reach North American Inflection With New Products

Baird Expects Nike To Reach North American Inflection With New Products
Related NKE
Consumer Discretionary Q4 Earnings: U.S. Consumer Appears Strong Amid Heightened Global Uncertainty
Golf Equipment Sales Finally On The Upswing — What's Behind The Comeback?
Polen Capital Focus Growth Strategy Portfolio Manager Commentary Q4 2018 (Seeking Alpha)

Nike Inc (NYSE: NKE) may have made a vital shift from away from a push market to a pull market.

After suffering through several quarters of devastating markdowns and an inventory glut, Nike is upbeat about its innovation and returning to a pull model with better sell-through, according to Baird. 

The Analyst 

Baird analyst Jonathan Komp reiterated an Outperform rating on Nike with $78 price target.

The Thesis

Following a conversation with Nike management, Komp said the apparel maker's confidence is "unwavering" and Nike remains bullish about the performance of newer product launches in North America and globally. (See the analyst's track record here.) 

Nike has strong sell-throughs and a positive outlook for Vapormax, which has now scaled to millions of pairs;' the newly launched Epic React is receiving a strong reaction; the Odyssey React is launching shortly; and the AirMax 270 and ZoomX are scaling more in the summer, Komp said.

Slight inventory growth of 5 percent year-over-year after six quarters of decline reflects healthy new product build, and Nike dismissed any concerns about recent promotions, the analyst said. 

“Based on the company’s recent actions and expected North America inflection, we are more confident NKE is responding to broader challenges with a potentially transformative combination of innovation, enhanced digital services/experiences, advanced manufacturing, and leveraging its scale to drive much better performance going forward,” Komp said.

Despite the storyline of adidas (AG) (ADR) (OTC: ADDYY) continuing to encroach on Nike’s turf in North America, the sportswear giant is still a global leader, with 55 percent of revenues derived from outside the U.S. Footwear drives the lion’s share of revenue for Nike, accounting for 65 percent of fiscal 2017 revenue.

Nike doubling down on a direct-to-consumer model also bodes well for the future health of the company, Komp said. grew nearly 30 percent to $2.2 billion in 2017 and remains Nike’s most profitable channel, he said. 

“We also believe the company’s strategy of pursuing greater direct-to-consumer sales represents an attractive means to extend the reach of the brand that can provide an attractive ROI."

Komp sees upward bias to estimates and continued positive sentiment as Nike earnings re-accelerate into fiscal 2019. 

Price Action

Nike shares were down 1.44 percent at $65.25 at the time of publication Thursday. 

Related Links:

Reed, McIlroy And Woods Make Nike The Clear Winner Of The 2018 Masters Tournament

Gen Z's Appetite For Luxury Drives LVMH, Kering To All-Time Highs

Photo courtesy of Nike. 

Latest Ratings for NKE

Jan 2019NeedhamUpgradesHoldBuy
Jan 2019HSBCUpgradesHoldBuy
Jan 2019BairdDowngradesOutperformNeutral

View More Analyst Ratings for NKE
View the Latest Analyst Ratings

Posted-In: Apparel Athleticwear Baird FootwearAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga


Related Articles (NKE + ADDYY)

View Comments and Join the Discussion!

Latest Ratings

CNPRBC CapitalUpgrades34.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Once Sync Limited Looks To Make Financial Frontrunners Out Of Africa's Unbanked

1 Out Of 9 Credit Scores Increased Overnight