3. Nike Inc. (NYSE:NKE)
Number of Hedge Funds: 66
Nike Inc. (NYSE:NKE) is a footwear and apparel corporation and the world’s largest supplier of athletic shoes and apparel. It’s a major manufacturer of sports equipment, renowned for its athletic performance products, stylish designs, and successful marketing campaigns. It has a strong global presence and is one of the most valuable brands in the world.
The company experienced a slight decline of 1.71% year-over-year revenue in the closing fiscal quarter of 2024. While the sales recorded missed Street estimates, they still amounted to $12.61 billion.
The sales growth slowed significantly in fiscal 2024, reaching a decade-low compared to the previous year, attributed to a decline in the lifestyle business, down 10%, and weaker-than-expected performance in the basketball and running segments, down 5%. Online sales were also impacted by a higher proportion of lifestyle products, and promotions, and fewer sales of popular franchises like the Air Force
The macroeconomic environment in China led to a decline in traffic across all channels beginning in April, down 15%. Still, sales in China exceeded market expectations. Sales in North America, Europe, the Middle East, Africa, and Asia Pacific fell short of analyst estimates by 3%, 1%, 2%, and 3%, respectively.
It’s accelerating product development through its Express Lane initiative, using digital tools and partnerships to streamline processes. The company has also restructured and invested in consumer-facing activities, focusing on sports and innovation to drive product momentum.
Nike Inc. (NYSE:NKE) remains a strong investment despite recent challenges. Its robust financial position provides a solid foundation for future growth. As the dominant player in the footwear market, which is expected to grow from $173.89 billion in 2024 to $242.33 billion by 2029, the company is well-positioned to capitalize on market trends.
Mar Vista Focus strategy stated the following regarding NIKE, Inc. (NYSE:NKE) in its Q2 2024 investor letter:
“NIKE, Inc.’s (NYSE:NKE) stock declined following management’s revised forecast for fiscal year 2025, projecting negative mid-single-digit revenue growth instead of the previously anticipated positive growth. The company has observed a marked slowdown in lifestyle product sales since April, a trend that persisted into June. Our current projections indicate that both sales and earnings will fall 15-20% below the conservative estimates set by management just a quarter ago. This substantial downward revision in sales and earnings is attributed to insufficient product innovation, wholesale channel shift, and intentional reduction of supply in lifestyle franchises. While the negative adjustments to guidance could potentially act as a clearing event for the stock, the degree of conservatism in the new projections remains uncertain.
Nike maintains its position as the global leader in sportswear. However, its revenue growth has been hampered by a lack of innovation, and its recovery is further complicated by deteriorating macroeconomic conditions in the US and China. The company’s renewed focus on innovation and efforts to re-engage with wholesale channels may eventually help restore growth, but we believe increased skepticism regarding management’s ability to execute is justified.”
