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Leadership Change Lifts NIKE Stock 8% in a Week: Is It Time to Hold?
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NIKE Inc. (NKE - Free Report) stock has made a notable comeback, with shares rising as much as 8.1% in the past week. The rebound comes after the company welcomes long-time veteran Elliott Hill as the new president and CEO. In addition, Hill will join the NIKE board of directors and serve on the Executive Committee.
Elliott Hill is expected to assume his new role effective Oct. 14, 2024, after John Donahoe steps down completing his long tenure, which began in January 2020. However, John Donahoe will remain an advisor through January 2025.
Can the New Leadership Turn the Tables for NKE?
Elliott Hill brings extensive global expertise, leadership, and deep industry knowledge essential for the company's success. Hill’s passion for sports, NIKE's brands, products, consumers, athletes, and employees makes him the ideal leader for the next phase of Nike's growth.
Elliott Hill has spent about 32 years with NIKE in various leadership roles, starting as an apparel sales intern in 1988. As president of Consumer and Marketplace from 2018 to 2020, his last role at NIKE, Hill played a key part in driving the success of the Nike and Jordan brands.
With Elliott Hill’s return, the company aims to regain the long-standing success it has lived. Having spent nearly his entire career at NIKE, Hill has an unparalleled understanding of the company. As the incoming CEO, he plans to revitalize NIKE by focusing on product innovation and strategic marketing. Investors are optimistic that Hill can restore NIKE’s former stature with his deep industry knowledge.
Is NIKE’s Overall Stock Performance Just as Impressive?
NIKE’s 8.1% stock growth in the past week has outpaced the industry's 4.9% rise. It also exceeded the broader Zacks Consumer Discretionary sector and the S&P 500’s respective increases of 1.4% and 1.8% in the same period.
However, looking back at the stock’s performance, we note that NKE has underperformed the industry in the year-to-date period. The NKE stock has lost 19.4% year to date compared with the industry’s decline of 17.3%.
The NIKE stock has also underperformed its peers like Skechers (SKX - Free Report) , Adidas (ADDYY - Free Report) , and Steven Madden (SHOO - Free Report) , which recorded gains of 4.3%, 21.4% and 16.7%, respectively, in the year-to-date period.
NIKE Stock Performance Vs. Peers
Image Source: Zacks Investment Research
The current share price of $87.46 reflects a 29.1% discount to its 52-week high mark of $123.39. Also, the NKE stock reflects a 23.6% premium from its 52-week low of $70.75.
NKE is trading below its 200-day moving average, indicating a bearish outlook and challenges in sustaining the recent performance levels.
NIKE Stock Trades Below 200-Day Moving Average
Image Source: Zacks Investment Research
The Challenging Picture at NKE
The new CEO steps in at a pivotal moment, as NIKE’s stock has been struggling due to sluggish sales in its lifestyle segment, overshadowing the strength of its performance products. The lifestyle category, which includes men’s, women’s, and Jordan lines, saw a dip in fourth-quarter fiscal 2024 after years of double-digit growth.
Adding to the challenge, consumer traffic in Greater China, a key market for NIKE, has seen a significant shift. The company noted the region’s highly promotional environment requires careful inventory management for NIKE and its partners. Although the near-term outlook for Greater China has softened, management remains confident in NIKE’s long-term competitive edge in the region.
Looking ahead to fiscal 2025, NIKE has adopted a cautious stance, citing headwinds from slow lifestyle product sales, macroeconomic challenges in Greater China, weaker digital sales, and unfavorable currency exchange rates. The company forecasts a mid-single-digit revenue decline for fiscal 2025, with sharper declines in the first half. Currency fluctuations are expected to have a further negative impact on revenues.
NIKE also predicts slower growth in its digital channels, particularly in the first half of fiscal 2025, due to fewer product launches, reduced focus on classic footwear, and a less promotional approach. The company expects uneven consumer trends in both Greater China and EMEA while balancing product innovation and newness across its wholesale channels.
For first-quarter fiscal 2025, NIKE anticipates a 10% revenue decline year over year due to aggressive adjustments in its classic footwear lines, continued challenges in digital sales, and a weaker outlook for Greater China.
Despite these hurdles, NIKE’s position as a leader in athletic apparel and footwear remains strong. However, its financial recovery is expected to take time, with ongoing operational and macroeconomic challenges still in play.
Is a Premium Valuation Good for NKE?
Despite the stock’s lackluster year-to-date performance, NIKE is currently trading at a forward 12-month P/E multiple of 27.55X, exceeding the industry average of 23.42X and the S&P 500’s average of 21.85X.
Though trading much below its five-year high of 48.27X, the current valuation may still be considered expensive, given the significant downside risks if the company's ongoing perils are not resolved for a prolonged period.
Image Source: Zacks Investment Research
How to Play the NKE Stock?
Although there are many expectations from NKE’s leadership change, the ongoing troubles related to challenges in lifestyle products and Greater China cannot be resolved overnight. Doubts regarding the success of NKE’s innovation strategy and inventory management efforts in the current scenario make the stock less attractive.
NKE’s premium valuation relative to industry peers also raises concerns about sustainability, especially amid the ongoing operational challenges. Investors should consider these factors carefully and evaluate their risk tolerance.
Image: Bigstock
Leadership Change Lifts NIKE Stock 8% in a Week: Is It Time to Hold?
NIKE Inc. (NKE - Free Report) stock has made a notable comeback, with shares rising as much as 8.1% in the past week. The rebound comes after the company welcomes long-time veteran Elliott Hill as the new president and CEO. In addition, Hill will join the NIKE board of directors and serve on the Executive Committee.
Elliott Hill is expected to assume his new role effective Oct. 14, 2024, after John Donahoe steps down completing his long tenure, which began in January 2020. However, John Donahoe will remain an advisor through January 2025.
Can the New Leadership Turn the Tables for NKE?
Elliott Hill brings extensive global expertise, leadership, and deep industry knowledge essential for the company's success. Hill’s passion for sports, NIKE's brands, products, consumers, athletes, and employees makes him the ideal leader for the next phase of Nike's growth.
Elliott Hill has spent about 32 years with NIKE in various leadership roles, starting as an apparel sales intern in 1988. As president of Consumer and Marketplace from 2018 to 2020, his last role at NIKE, Hill played a key part in driving the success of the Nike and Jordan brands.
With Elliott Hill’s return, the company aims to regain the long-standing success it has lived. Having spent nearly his entire career at NIKE, Hill has an unparalleled understanding of the company. As the incoming CEO, he plans to revitalize NIKE by focusing on product innovation and strategic marketing. Investors are optimistic that Hill can restore NIKE’s former stature with his deep industry knowledge.
Is NIKE’s Overall Stock Performance Just as Impressive?
NIKE’s 8.1% stock growth in the past week has outpaced the industry's 4.9% rise. It also exceeded the broader Zacks Consumer Discretionary sector and the S&P 500’s respective increases of 1.4% and 1.8% in the same period.
However, looking back at the stock’s performance, we note that NKE has underperformed the industry in the year-to-date period. The NKE stock has lost 19.4% year to date compared with the industry’s decline of 17.3%.
The NIKE stock has also underperformed its peers like Skechers (SKX - Free Report) , Adidas (ADDYY - Free Report) , and Steven Madden (SHOO - Free Report) , which recorded gains of 4.3%, 21.4% and 16.7%, respectively, in the year-to-date period.
NIKE Stock Performance Vs. Peers
Image Source: Zacks Investment Research
The current share price of $87.46 reflects a 29.1% discount to its 52-week high mark of $123.39. Also, the NKE stock reflects a 23.6% premium from its 52-week low of $70.75.
NKE is trading below its 200-day moving average, indicating a bearish outlook and challenges in sustaining the recent performance levels.
NIKE Stock Trades Below 200-Day Moving Average
Image Source: Zacks Investment Research
The Challenging Picture at NKE
The new CEO steps in at a pivotal moment, as NIKE’s stock has been struggling due to sluggish sales in its lifestyle segment, overshadowing the strength of its performance products. The lifestyle category, which includes men’s, women’s, and Jordan lines, saw a dip in fourth-quarter fiscal 2024 after years of double-digit growth.
Adding to the challenge, consumer traffic in Greater China, a key market for NIKE, has seen a significant shift. The company noted the region’s highly promotional environment requires careful inventory management for NIKE and its partners. Although the near-term outlook for Greater China has softened, management remains confident in NIKE’s long-term competitive edge in the region.
Looking ahead to fiscal 2025, NIKE has adopted a cautious stance, citing headwinds from slow lifestyle product sales, macroeconomic challenges in Greater China, weaker digital sales, and unfavorable currency exchange rates. The company forecasts a mid-single-digit revenue decline for fiscal 2025, with sharper declines in the first half. Currency fluctuations are expected to have a further negative impact on revenues.
NIKE also predicts slower growth in its digital channels, particularly in the first half of fiscal 2025, due to fewer product launches, reduced focus on classic footwear, and a less promotional approach. The company expects uneven consumer trends in both Greater China and EMEA while balancing product innovation and newness across its wholesale channels.
For first-quarter fiscal 2025, NIKE anticipates a 10% revenue decline year over year due to aggressive adjustments in its classic footwear lines, continued challenges in digital sales, and a weaker outlook for Greater China.
Despite these hurdles, NIKE’s position as a leader in athletic apparel and footwear remains strong. However, its financial recovery is expected to take time, with ongoing operational and macroeconomic challenges still in play.
Is a Premium Valuation Good for NKE?
Despite the stock’s lackluster year-to-date performance, NIKE is currently trading at a forward 12-month P/E multiple of 27.55X, exceeding the industry average of 23.42X and the S&P 500’s average of 21.85X.
Though trading much below its five-year high of 48.27X, the current valuation may still be considered expensive, given the significant downside risks if the company's ongoing perils are not resolved for a prolonged period.
Image Source: Zacks Investment Research
How to Play the NKE Stock?
Although there are many expectations from NKE’s leadership change, the ongoing troubles related to challenges in lifestyle products and Greater China cannot be resolved overnight. Doubts regarding the success of NKE’s innovation strategy and inventory management efforts in the current scenario make the stock less attractive.
NKE’s premium valuation relative to industry peers also raises concerns about sustainability, especially amid the ongoing operational challenges. Investors should consider these factors carefully and evaluate their risk tolerance.
Nonetheless, investors already owning the stock may prefer to wait and watch for developments after the CEO change before selling this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.