Nike has shed more than 20% in market capitalization so far in 2023. Worrisome?
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I second @3qwv remarks
The up & down cycles of layoffs and hiring freezes are challenging, but one would hope they look deeper and don’t just make slashing cuts that make it hard to finish projects or keep the business moving. There are whole teams looking very busy doing nothing of value. Am hoping if cuts are made thought is put into how to make things move faster (ie, actually embrace Agile). There is so much overhead, admin, and teams that are blockers to progress that on any given project it quadruples the effort. Be Lean, be Agile - take down the barriers and let the bestest & brightest succeed versus being dragged down by (for example) process overhead that takes 50+ hours of work and approvals over 3-4 weeks for what is a simple update to a few fields in a table or application screen. When overhead and approvals are 1000 times the actual work, the org is not setup to be successful
A few issues. China is potentially a large problem. For those who follow the news you’ll know their economy is on a kn--e’s edge right now. Keep your eyes on that.
Consumers are finally starting to tap out with sports shoes and apparel as evidenced by the DKS ugly earnings earlier this week. Credit card debt just reached a record high. Something like $1.2 trillion. Even delinquencies on car payments are finally starting to increase.
Student loan repayments start in a few weeks. A lot of people with student loans actually took on more debt during the deferment rather than using the once-in-a-lifetime no-interest gift to pay down their loans. I read that only 1% of borrowers kept paying down their loans during the deferment. That blows my mind.
With a P/E north of 30, Nike stock is still expensive even with the decline this year. Nike is also in an innovation rut right now. And other brands like Hoka and On are slowly but surely eating into footwear market share.
Nike will be fine in the long term but the next few years could be rough. Wouldn’t surprise me if JD provides another “gift” of a 2-3% reduction in force on his way out the door, so the new CEO won’t be blamed for it. Earnings per share is sacred at Nike and the easiest way to increase EPS is to start lowering your labor overhead. I don’t see this happening soon but 2024 could be a little ugly.
The U.S. economy has been on a government money fueled coke high the last several years. It feels so so good going up and is going to feel so so bad coming down.
This one goes to 11
We’ve been there in 1995-97, 2001-2002. 2008-09, 2015-16, 2020. From bo-m to bust. That’s the lifecycle of most big companies. Every time there are gloomy articles about the future. Nothing new. Same with Adidas and Puma.
Largest stakeholders are certainly not happy. Pretty sure JD and his whole C-suite are having tough meetings with the Board.
Question is: do they have a clear plan on how to get back on track? Do they understand what is wrong (apart from the economy)?
What is obvious: they already prepare for a few tough years ahead - hence the JD mail on PSP range and criteria.
18 Billion dollar buyback over the next 5 years, it will take some liquidity out of the open market for shares. Eventually will rebound like most fortune 500 companies. However, I do see JD leaving in the next 2 years. I think he came in to do what he was suppose to do from a 5 year plan, invest/focus on infrastructure (technology), make Nike more corporate, and bring some consistency to the business.
He's frankly made Nike boring but from what I've seen, that's what he was hired to do. Next CEO will be back to innovating product and will be from within.
Just to note, I'm not a JD fan but I can clearly tell what he was hired to do. Did I agree with it...? Yes and no. Was it always executed properly? no but there is always areas of improvement needed. JD and his LT are no exception.
Business isn't perfect, unless your NVIDIA and every dollar spent has a 1.70c return on it. We're miles from that and probably always will be. We're more of a 1.15 - 1.25c return type of company. Not bad but not what the stock market cares for at the moment.
Nike has a bigger product archive, more people resources, more athlete endorsements and more leverage over accounts than any other brand. Yet still can’t figure it out.