Analyst Questions Nike’s Long-Term Plans
However, some analysts have cast doubt on whether these plans will be effective in the long run. TD Cowen analyst John Kernan expressed the view that Nike needs to improve its marketing efforts beyond basketball, streetwear, and lifestyle trends, to ensure sustained success. The company faces disruption from smaller competitors in the footwear and apparel industry. Moreover, CFRA lowered its opinion on Nike stock from hold to sell.
Shaky Sales Trends and Tough Competition
Nike executives acknowledged that during the fiscal second quarter, sales trends were uncertain in their digital channels and international markets. Additionally, competition from other industry players like Adidas, Deckers Brands’ subsidiary Hoka One One, and On Holding has remained strong. The performance results indicated that Wall Street’s profit estimates were too high for Nike’s competitors, such as Adidas, Vans owner VF Corp., and Under Armour.
The Challenge of Maintaining Full-Price Selling and Margins
Nike, while aiming to avoid engaging in aggressive discounting, faces challenges in maintaining full-price selling and preserving profit margins. The company intends to manage inventories for key franchises more carefully to avoid over-promotion, which can limit sales growth. However, analysts suggest that Nike’s efforts to cut costs and reinvest savings might impact margins and earnings if top-line performance continues to soften in the coming months.
Focus on Growth Drivers and Cost Reductions
Nike executives believe that Jordan-branded clothing and products for golf, soccer, football, women, and children will yield stronger results. Furthermore, the company plans to emphasize its business geared toward women, including bras, leggings, retro-themed running shoes, and other offerings. Nike also aims to streamline its operations by simplifying product selection, introducing more automation, and reducing management layers.