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• Nike is the world’s leading sportswear manufacturer – although it currently faces some short-term challenges.
• Sales fell 10% in the first quarter and are expected to decline again by 8-10% in the second quarter. The company is increasing the supply of some of its main footwear products – including:1st Air Force AND Air Jordans 1 – to prevent discounting.
• This trend is expected to continue and, while painful from a sales perspective, should maintain high brand value and slowly deliver margin improvement.
• In the first quarter, cost discipline and pricing actions helped gross margin escalate 120 basis points to 45.4%, although these benefits are expected to be offset in the second quarter by higher promotions to clear excess inventory.
• Also adding to uncertainty is the fact that the company is changing its CEO, with former president of consumer and marketing Elliott Hill rejoining the company after retiring in 2020. Hill has 32 years of experience at Nike, starting as an intern, and according to his words are expected to be so. provide “bold, innovative products that distinguish us on the market”.
• Although the company is struggling due to a combination of internal and external factors, its share price reflects this (down 22% this year (1) compared to animated growth S&P500). We remain confident about the strength of the brand, its products and marketing opportunities. Moreover, the fresh CEO seems to be more…“product” the person who should prioritize fresh designs that appeal to consumers.
• We believe Nike is currently undervalued and view the recent share price decline as a buying opportunity for this sportswear industry leader.