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• Nike is the world's leading sportswear business – although it is currently facing some imminent challenges.
• Sales fell 10% in its first quarter and are set to decline again by 8-10% in Q2. The company has been strengthening the supply of some of its major footwear brands – includingAir Force 1 again Air Jordan 1 – to prevent demotion.
• This trend is expected to continue and, although painful from a sales point of view, it should keep its product value high and gradually bring margin improvements.
• In Q1, streamlining costs and pricing actions helped gross margins grow by 120 basis points to 45.4%, although these gains are expected to be corrected in Q2 with higher promotions to offset the overall cost of goods.
• Adding to this uncertainty, the company is changing its CEO, as former president of sales and marketing Elliott Hill is joining the company after his retirement in 2020. Hill boasts 32 years of experience at Nike, starting as a student, and it is expected in his words. deliver “bold, innovative products that set us apart in the market”.
• Although the company is struggling due to a combination of internal and external factors, its share price reflects this (down -22% so far this year (1), compared to buoyant. S&P 500). We remain optimistic about the power of the brand, its products, and marketing potential. Additionally, the new CEO appears to be more than“product” someone who should prioritize new designs that are relevant to consumers.
• We see Nike as being undervalued at the moment and view the recent drop in share price as a buying opportunity for this sportswear leader.