Nike's Best Defense Is a Good Offense
March 22 2017 - 2:48PM
Dow Jones News
By Miriam Gottfried
Nike wants to maintain its status as most valuable player.
Investors shouldn't underestimate the importance of its size in
that feat.
The sportswear company's fiscal third-quarter sales fell short
of analysts' expectations when it reported late Tuesday. Nike said
futures orders, which many investors consider an indicator of
upcoming sales results, were down 4% year over year or 1% after
adjusting for currency fluctuations. The company said it is
limiting supply amid surprisingly strong promotional activity from
competitors and that it is expecting gross margins to contract in
the fourth quarter. The cautionary note sent shares down 6%
Wednesday.
But Nike hasn't stopped playing offense and its investment
should allow it to win back market share.
Its sales growth has suffered amid a comeback by competitor
Adidas in North America, but Nike has the advantage of scale. That
allows it to outspend competitors on marketing and research and
development -- two of the biggest factors driving sales. Given
that, to believe Nike can't retake the share lost to Adidas is to
believe its long-term competitive advantage has disappeared.
The company has a basketball-inspired name for its three-pronged
growth strategy: "triple double." It is focusing on being more
innovative, bringing products to market more quickly and increasing
direct contact with consumers through apps, membership programs and
personalization. Nike is launching new running shoes this weekend
and has more products in the pipeline.
Investors may continue to point to negative futures as a sign
that things have changed, but futures have become less reliable.
Actual results have been closer to management's guidance than to
reported futures in all but two quarters since the beginning of
fiscal 2015, according to Instinet.
Nike rarely misses a rebound.
Write to Miriam Gottfried at Miriam.Gottfried@wsj.com
(END) Dow Jones Newswires
March 22, 2017 14:33 ET (18:33 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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