Nike (NKE) is able to create strong long-term shareholder value

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Nike, Inc. (NYSE: NKE) is the undisputed leader in the booming sportswear market, with strong financial performance that outperforms its close competitors. For the past few weeks, shares of the sneaker maker have been trading below the 52-week averages, in line with the overall market trend. It is down 31% from the peak in November.

Although the low valuation looks attractive from an investment perspective, it is important to consider all factors before investing. NKE has an impressive track record of outperforming the S&P 500 Index and has generated more than 100% shareholder returns over the past ten years. It has long been an investor favorite, thanks to the company’s brand equity and strong fundamentals.


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It is very likely that the company will continue to generate strong shareholder value for the foreseeable future. He has regularly returned capital to shareholders through dividends and share buybacks. This, combined with continuous innovation and the great relevance of Nike products, makes the stock a good long-term investment.

Resilience

The Beaverton-based company has shown surprising resilience during the pandemic, defying fears that falling demand for consumer discretionary goods due to weak consumer sentiment will weigh on sales. Financial performance has been particularly strong, with quarterly earnings consistently beating estimates over the past two years. Sales benefited from Consumer Direct’s acceleration strategy, which mitigated headwinds from the COVID-related disruptions and market shutdown.

Q3 mixed

Supported by the continued rise in direct-to-customer business, sales grew 5% annually to approximately $11 billion in the third quarter of 2022 and exceeded expectations. Meanwhile, a double-digit increase in costs and expenses weighed on bottom line and earnings fell 3% to $0.87 per share. Geographically, North America continued to be the main driver of growth.

From Nike’s third quarter 2022 earnings conference call:

“The strength of the NIKE brand and consumer demand remain at an all time high and we are confident in the momentum of our business. Our deep focus on the consumer and the sport is what sets us apart from the rest. We continue to leverage the same principles for the strategic and financial management of the business. And as we approach our 50th anniversary, we remember NIKE’s rich history that has delivered consistent results even during times of uncertainty as we build NIKE for the future.

Outlook

Strong cash flow and overall financial flexibility are helpful in meeting management’s expansion goals and weathering macroeconomic headwinds. However, high inflation and weak consumer confidence due to the Russian-Ukrainian conflict could negatively impact sales in the short term.


NIKE Q3 2022 Results Call Transcript


Nike’s stock entered 2022 on a high note, but it couldn’t sustain the uptrend. It has lost around 25% so far. Stocks closed the last trading session higher, extending recent gains.

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