What’s Next For Nike’s Stock?

Note: Nike’s

NKE
FY’23 ended on May 31, 2023.

After almost a 7% decline year-t0-date, at the current price of around $109 per share, we believe Nike stock (NYSE: NKE), a company designing, developing, and marketing footwear, apparel, equipment, and accessory products – could see gains in the longer term. NKE stock has declined from around $117 to $109 YTD, underperforming the broader indices, with the S&P growing about 16% over the same period. The company’s gross margin came down 240 basis points to 43.5% in FY 2023, due to promotional activities and higher cost of goods sold overall, as well as the negative impact of exchange rates. Consequently, Nike’s profits suffered due to heavy promotional activity and slower market growth. While the company’s profitability will likely be pressured in the short term due to advertising activity, the long-term outlook for the company looks quite stable. Nike has managed to make progress in reducing inventory surplus in Q4. Its inventories were unchanged from the same period a year earlier but were down 13% from their peak in Q1 2023. A number of sporting events, including the women’s soccer world cup and the Kobe brand’s relaunch, are also expected to drive sales. There is also potential for the Jordan brand to grow in the international markets. Also, the company’s ability to leverage China’s recovery is a big positive for the company. As such, Nike’s sales in China grew by double-digits for the company during the June 18th shopping festival, the country’s annual shopping festival.