Nike Inc. (NKE, Financial) is under the spotlight this week as it needs to convince investors of its strategy to increase sales. This urgency comes after the company experienced consecutive annual losses for the first time since the 1980s, lagging behind its competitors and the broader market.
The world's leading sportswear brand has seen over 40% of its value wiped out since a peak in 2021, translating to roughly $130 billion in lost shareholder wealth. This decline is part of a broader trend affecting consumer stocks, with elevated borrowing costs causing a reduction in consumer spending.
With its earnings report due on Thursday, there's anticipation around Nike's potential introduction of new footwear and apparel to rejuvenate demand. This comes at a critical time as it faces stiff competition from On Holding AG, Adidas AG, and Deckers Outdoor Corp.'s Hoka, all of which have outperformed Nike this year. Furthermore, Nike received a rare sell rating from Williams Trading recently.
Bank of America Corp. analyst Lorraine Hutchinson highlighted the importance of innovative product launches as a pivotal moment for Nike's stock. Despite a warning in December about declining revenue for the quarter ending in February, Nike is expected to showcase its new Air Max Dn sneaker, described as its "best Air Max product in years."
Analysts are keen on Nike's strategy to regain its footing in the market, especially in the running category and its plans for the Jordan brand and women's segment. The upcoming Paris Olympics could serve as a platform for new product introductions. However, Nike's projected revenue growth for the fiscal year ending in May is modest, with expectations set at around 1%, marking its slowest growth since 2010, barring the pandemic-impacted 2020.
Despite the challenges, some analysts like Aneesha Sherman from Bernstein view Nike as undervalued, noting its current shares trade below its five-year average. However, a turnaround in sales and investor confidence might take time, indicating a gradual recovery path.
