About the company

Nike is an American company that specializes in the design, development and sale of athletic footwear, clothing and accessories. In the 1980s and 1990s, the company rose to popularity thanks to its collaboration with professional athletes such as Michael Jordan and Tiger Woods . This is how it became the world's largest manufacturer of sports shoes and clothing until the present day. The company expanded its product range to include various sports activities and actively participated in street culture. Nike continues to innovate in sports footwear and apparel technology while maintaining its market leadership position through global marketing campaigns and continuing collaborations with leading figures in sports and culture.

Reducing the prices of sneakers

Analytics company Vertical Knowledge collected online pricing data from eighteen chains such as Foot Locker , Dick's Sports Goods or Macy's and found that for the first quarter of 2024, an average of 44% of all Nike sneakers were marked down. This is a significant increase from 19.4% 2 years ago for the same period. Going by this trend, it seems that the days when Nike could sell their merchandise at full price are over. This change may pose a problem for the company, as its sneakers have long been considered prestigious products. Last year, Nike surprised the investor team by lowering its sales forecasts for 2024. The price cuts and increased competition are also related to Nike's decision to return to some wholesale distributors, although in the past it focused more on direct-to-consumer sales. Sneaker prices at most major retailers fell to an average of $79.92 in early 2024, down from $103.61 in the first quarter of 2022. According to footwear industry analyst Matt Powell , these discounts can threaten the image of the brand and put Nike on par with mainstream manufacturers.[1]

Planned cuts and layoffs

As part of the austerity measures, Nike plans to cut about 2% of its workforce, representing more than 1,600 jobs, as it sees demand for its products drop. This decline also affected competing companies such as Adidas , which are struggling with the same problem. Many consumers cannot afford to buy expensive goods because of high rents or interest rates. Nike aims to save $2 billion over the next 3 years with these measures. The plan also includes narrowing the supply of some products and reducing management levels. According to a report from Wall Street Journal , these cost-saving measures will not affect employees in stores, distribution centers and even those in the innovation team.[2]

Economic results

The company reported revenue of $51.2 billion for 2023 (the 12-month period ending Nov. 30), up 9.65% year-over-year from last year's $46.7 billion. At the same time, it recorded a year-on-year decrease in profit by 16.14% from 6.05 billion in 2022 to 5.07 billion USD for the past year. Quarterly revenue for the period ending November 30, 2023 was $13.40 billion, an increase of 0.8% year-over-year on net income of $1.58 billion, an increase of 18.56%. The company also announced a quarterly dividend of $0.37 per share.*[3][4]

Downgrade of shares

Analysts from the investment bank Oppenheimer changed the stock's rating from " outperform " to " market ". perform ". The move reflects concerns about the short-term outlook for sales, which is affected by fluctuations in demand, slowing product innovation and competitive pressure. While Nike has strong long-term potential, a period of slower growth is expected in the coming quarters.[1] The company has an average rating of " medium buy " from 32 different analyst firms, while 20 rate it with a " buy " rating.

Nike stock price performance over the past 5 years. ( Source : Google Finance )*

Conclusion

Nike is facing the challenges of reducing the prices of its products and the need to restructure its workforce. Nevertheless, it remains a leading player in the athletic footwear industry and has strong long-term potential. However, investors should keep in mind the possible short-term impact of these factors on the development of the company's share price. It is important to observe how the company will react to these problems and what measures it will take to maintain its competitiveness and long-term success.

Adam Austera , Principal Analyst at Ozios

* Past performance is no guarantee of future results

[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied in any forward-looking statements.

[1] https://www.investing.com/news/stock-market-news/retailers-slash-prices-on-more-nike-sneakers-in-2024-data-shows-3290984

[2] https://www.reuters.com/business/retail-consumer/nike-plans-cut-over-1600-jobs-wsj-2024-02-16/

[3] https://www.google.com/finance/quote/NKE:NYSE?sa=X&ved=2ahUKEwjEgIXV97mEAxW17AIHHeqpCpsQ3ecFegQIQxAX

[4] https://www.marketbeat.com/instant-alerts/nyse-nke-consensus-analyst-rating-2024-02-19/