1. Nike, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 66
Nike, Inc. (NYSE:NKE) is the world’s largest supplier of athleticwear and is well-recognized for sports equipment. The company operates over 1000 retail stores worldwide.
The company generated $12.61 billion in revenue in FQ4 2024, lower than analyst expectations, down 2% year-over-year. For the full-year fiscal 2024, revenue grew around 1% on a currency-neutral basis and earnings per share grew 15%. The company regained the number one position in Korea in women’s lifestyle footwear and made improvements in the Japanese market.
Sales are expected to drop 10% in the next quarter. The company’s CFO, Matt Friend, said that this will be likely due to problems with the company’s e-store, holdback from wholesalers because of the lack of new designs, and lower sales in China because of increased competition and changed consumer preferences.
Nike, Inc. (NYSE:NKE) changed its distribution strategy to make double profits through B2C sales, especially through e-stores, by only keeping retail partnerships with 40 select brands. However this strategy did not work, so it partnered again with some retailers it initially cut out. It also laid off 2% of its corporate workforce in February, equating to 1600 jobs.
The company is expected to improve with the help of its “multi-year innovation program” which will include new products with digital capabilities and technology, and increased speed for concepts to reach the consumer. It’s also planning to invest around $1 billion in consumer-facing activities in 2025.
There is also a focus on new lifestyle products, an example of which is last quarter’s introduction of Dynamic Air, a cushioning technology. At the same time, Nike, Inc. (NYSE:NKE) is reducing the production of some popular products to focus on newer designs, which will temporarily slow down overall growth, but be recovered through new products.
Even with the challenges Nike, Inc. (NYSE:NKE) faces in China or a shortage of new designs, it’s still one of the most premium brands in athletic wear. The company is a reliable and profitable grower, and therefore one of the best fitness and gym stocks to buy now.
ClearBridge Large Cap Growth Strategy stated the following regarding NIKE, Inc. (NYSE:NKE) in its Q2 2024 investor letter:
“Other moves during the quarter included sales of United Parcel Service (UPS) and NIKE, Inc. (NYSE:NKE). Nike has become overly reliant on key platforms, like Jordan, for revenue growth while innovation in areas like running has lagged. Nike could face continued revenue and profit pressure as it invests to re-invigorate innovation and re-position the business back toward wholesale outlets. As such, we are seeking out better ways to participate in the global consumer recovery in companies where earnings estimates have already reset.”
While we acknowledge the potential of NKE to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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