Is Nike Stock a Buy?


When it comes to selecting great stocks to hold, I always start by looking at the market leaders. After all, companies that are at the top of their industry should be doing something right that allows them to hold that leadership position. Nike (NKE -1.86% ) is one such company within the athletic footwear and apparel industry. It was able to grow its global market share in sports shoes from around 16.8% in 2011 to around 27% in 2019.

Even when Nike faced tough challenges last year brought on by the COVID-19 pandemic, the company managed to post a credible performance for its fiscal year 2020 earnings, with revenue down just 4%. year-over-year to $37.4 billion despite temporarily closing the majority of its global stores.

With the pandemic still raging in many parts of the world, can Nike still manage to navigate rough seas to post steady growth? Does that qualify the sports giant as a buy?

Image source: Getty Images.

Digital commercial dynamics

One aspect that stands out for Nike is its commitment to digital initiatives. The company invested time, money and effort in building a solid digital platform that served it well when the pandemic hit. For its second quarter of fiscal 2021 (which ended November 30), digital sales grew 84% year-over-year, with the North America segment posting triple-digit percentage growth .

CEO John Donahoe mentioned on the company’s latest earnings call that Nike has now seen three consecutive quarters of 80% year-over-year digital growth, a testament to the strength of its digital platform. The company also actively engages its audience through social media platforms, with 7 billion brand impressions generated across various media during the quarter.

Donahoe believes the shift to buying online and using digital resources is an ongoing trend, and Nike is well positioned to seize this shift and maximize opportunities to grow its loyal customer base.

Pipeline of innovative products

Nike continues to do what it does best: introduce innovative, cutting-edge products that continue to impress its customers. The second quarter saw the launch of the LeBron XVIII and Kyrie 7 basketball sneakers, both of which were very well received. The company is also expanding its collection of women’s maternity wear and plans to increase its assortment of sizes for its children’s wear division.

Nike’s latest release, the ZoomX Invincible Run, combines cushioning, stability and fluid dynamics to create a shoe that promises to protect runners from injury and also improve running efficiency. And four years after Nike released its first self-lacing shoes, the company is now releasing new self-lacing Air Jordan shoes that allow the wearer to customize their fit and feel.

This stream of new shoe releases underscores Nike’s commitment to refreshing its product portfolio and staying one step ahead of the competition.

Growing Membership Base

Building a strong membership base is important for any brand, and Nike does it extremely well. Since the start of the pandemic, Nike has added more than 70 million new members worldwide. Donahoe also reports that the growth of buying members (meaning members who spend using Nike’s apps) is outpacing the growth of new active members, a sign of strong conversion that bodes well for the company.

Nike held its first-ever Member Days and offered exclusive products and rewards for participation, resulting in high levels of engagement and strong sales conversion. This constant engagement with customers will make them attached to the brand and result in larger basket sizes over time, while the rewards offer should entice members to keep buying digitally, further boosting sales. digital.

Nike’s best days are yet to come

Nike has shown it still has what it takes to grow, despite one of the greatest crises humanity has faced in a century. Revenue for the six months of fiscal 2021 was up 4% year-over-year, while net profit jumped 12% year-over-year. As a sign of confidence, management announced a 12% increase in its annual dividend to $1.10 per share, and the company now has the enviable record of increasing its dividend for 19 consecutive years.

I firmly believe that Nike’s best days are yet to come. The company has successfully adopted an omnichannel retail strategy that includes its physical stores layered over its online presence. By establishing a strong connection with customers, the business can generate lasting loyalty, and apps also make it easier for the business to launch products and send out personalized marketing and promotional materials. Nike’s competitive moat remains as strong as ever, and it’s a stock you should consider adding to your investment portfolio.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.


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