Nike Inc (ticker: NKE) shares have been under pressure this year as the dynamic of the global retail market is changing. But while Nike shares are down more than 10 percent in the past three months, the issues it is facing may simply be a temporary bump in the road for long-term investors.
Gander Mountain and Sports Authority are just two names on a growing list of sporting goods retailers that have filed for bankruptcy in the past couple of years, leaving Nike and rivals Under Armour ( UA, UAA) and Adidas without key distribution channels.
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Susquehanna analyst Sam Poser says it is “becoming clear” that Under Armour is not offsetting sales losses resulting from closing sports retail locations. In fact, discounted Under Armour sales at Kohl’s Corp. ( KSS) may be weighing on prices at competing retailers, Poser says.
To fight back against a changing environment, Nike recently announced plans to cut roughly 1,400 of its global workforce as it narrows its focus on 12 specific cities. The company expects these cities will contribute 80 percent of Nike’s total growth over the next two-and-a-half years. Nike reported a 9 percent decline in North American sales in its third quarter, but CEO Mark Parker says the company is now “getting even more aggressive in the digital marketplace, targeting key markets and delivering product faster than ever.”
Even though the sporting goods business may seem as if it’s in disarray at the moment, Barclays analyst Matthew McClintock says long-term Nike investors shouldn’t lose sight of all of the positives the company has going for it.
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“Looking forward to [fiscal 2019], the company’s innovation agenda should only have an accelerating, material impact on results, which, when combined with the removal of [foreign exchange] pressures and potential future savings from restructuring, appear well-positioned to meet if not exceed past periods of exceptional performance,” McClintock wrote on Monday.
While disruption in the sports retail market and promotional pricing pressures will likely continue to weigh on Nike’s numbers in the near term, the long-term story hinges more on Nike’s innovation and brand strength, McClintock said.
Barclays maintains an “overweight” rating on Nike and a $65 price target for the stock.
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Nike Inc (NKE) Innovation Will Drive Long-Term Growth originally appeared on usnews.com
