We have retained our Neutral stance on
), as we remain impressed by its quarterly performances, robust
future orders, focus on expanding its global footprint and brand
enhancement, offset by intense competition amid rapidly changing
Nike's strong portfolio of globally recognized brands, Nike,
Converse, Chuck Taylor, Hurley, All Star, One Star, Star Chevron,
and Jack Purcell along with a focus on innovation has helped
further strengthen its leadership position. These attributes also
provide Nike a competitive edge over its peers,
Brown Shoe Co. Inc.
Nike is sincerely striving to find opportunities to expand its
global footprint and augment its market share via acquiring new
brands, developing its direct-to-customer business and divesting
its underperforming brands. Put together, these strategies
position the company strongly among competitors.
Moreover, this footwear and athletic apparel retailer has
outperformed the Zacks Consensus Estimate in 3 of the trailing 4
quarters, recording an average beat of 3.5%. In the most recent
quarter, it posted an earnings surprise of 14.0% and an 11.0%
increase in earnings per share, aided by solid top-line growth,
leveraged selling, general & administrative (SG&A)
expenses and lower share count. Net sales surged 7.0% year over
year driven by superior demand for Nike brand.
Going forward, we note that the company's avenues to boost its
top line remain strong as evident from escalating future orders.
However, higher input costs as well as a mix shift towards low
margin businesses continued to weigh on the company's gross
margin, which contracted 30 basis points to 42.5%. Beside the
quarter's implications, we expect the sluggish discretionary
spending and intense competition amid rapidly changing customer
preferences to undermine Nike's future prospects. Consequently,
we prefer to be on the sidelines at this juncture.
Other Stocks to Consider
Besides Nike, other stocks worth considering in the shoes and
related apparel industry are Adidas and
Steven Madden Ltd.
), both of which hold a Zacks Rank #2 (Buy).
(ADDYY): ETF Research Reports
BROWN SHOE CO (BWS): Free Stock Analysis
NIKE INC-B (NKE): Free Stock Analysis Report
STEVEN MADDEN (SHOO): Free Stock Analysis
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