Nike (NKE) — Stock Investing Analysis

Earnings Highlights; Bulls Say vs. Bears Say; Investment Thesis

Invesdea 💰 Investing Ideas
3 min readSep 30, 2023

📖 Business Facts

🔹 Nike, headquartered in Oregon, US, specializes in designing, developing, and selling athletic footwear, apparel, equipment, and accessories.

🔹 Slogan: “Just Do It”

🔹 Endorsements and Sponsorships: famous celebrities including Michael Jordan, LeBron James, Serena Williams, Cristiano Ronaldo

🔹 Competitors: Adidas, Under Armour, Lululemon, Under Armour

🔹 Shoes: Nike’s famous products include Air Force 1, Air Jordan, Mercurial Soccer Cleats

🔹 CEO: John Donahoe was assigned as CEO in 2020. Before that, he was the CEO of eBay during its rapid growth period and later led ServiceNow through IPO as CEO.

💰 Quarterly Financial Results on 9/28/23

🔹 Revenue: $12.9B, +2% y/y

🔹 Operating Expenses: $4.1B, +5% y/y

🔹 Net Income: $1.45B, -1% y/y

🔹 Demand Creation Expense: $1.1B, +13% y/y due to advertising and marketing

🔹 Inventory: -10% y/y

🔹 Nike Direct Revenue: $5.4B, +6% y/y

🔹 North America Revenue: $5.4B, -2% y/y

🔹 Europe, Middle East & Africa Revenue: $3.61B, +8% y/y

🔹 Greater China Revenue: 1.29B, +5% y/y

🔹 Dividends: $524M, +9% y/y

🔹 Share Repurchases: $1.1B

Investment Thesis

📈 Bulls Say

🔸 Brand: Nike remains the largest sports apparel company with extremely high brand recognition. This means that Nike has more pricing power, leading to higher profit margins. Furthermore, collaborations with world-class athletes, such as Michael Jordan, LeBron James, and Cristiano Ronaldo, ensure Nike’s long-term influence.

🔸 Profitability: Nike has reduced its dependence on third-party retailers by continuously focusing on the Nike Direct direct-sales business. This strategy allows Nike to control inventory and pricing better, enhancing its profit margins.

📉 Bears Say

🔸 Competition: The fashion casual sports market has been highly competitive for a long time and is becoming saturated. Nike’s competitors include traditional sports brands like Adidas and Puma and are continuously challenged by emerging brands such as Lululemon and Under Armour. Nike might not be able to maintain its industry-leading position.

🔸 Macro Environment: Consumers' purchasing power decreases in high-interest rates and high-inflation environments. This could affect sales of premium sports brands like Nike. Consumers, especially the young generation with limited purchasing power, might consider postponing purchases or turning to more affordable alternatives.

📝 Conclusion: Hold

The athletic shoe/apparel market is fiercely competitive, and consumer purchasing power is declining, but Nike’s core brand competitiveness has not been shaken yet.

⚠️ This article does not constitute investment advice. The pictures and data are from the company’s website. The author strives for accurate information. If there are any issues, feedback is welcome.