Where will Nike be in 1 year?
Nike (NYSE: NKE) had a roller coaster year in 2020. After falling more than 30% in the first three months of the year, the share price has more than doubled since. Most of the stores are now reopened and management is confident of the company’s strong momentum in 2021 and beyond.
Rising sales and profits will of course propel Nike to new heights. This would be the case for any sporting goods retailer. But the company’s efforts over the past year to continue driving these rising sales and profits provide important clues as to the future of this business, and particularly where it is. consumer discretionary stock will be in a year.
Past the crisis
Income to augment of 9% in the second quarter of fiscal 2021 (ended November 30) signals the return to growth for Nike after a small publication date in the previous quarter. The business will depend on its Greater China segment for earnings. This region is 24% growth during the quarter significantly outperformed other geographies.
While physical foot traffic remains depressed, it is expected to start ramping up in the company’s global store base as economies continue to slowly open, which will boost revenue.
Nike is praised for its remarkable marketing expertise, and it benefits tremendously from its lineup of superstar-endorsed athletes. We’ve already seen the return of the sport live, so having more major sporting events throughout the year will lead to more exposure for the apparel giant. And the company certainly expects to gradually spend Following on marketing, which he describes as a “demand creation” expense, compared to previous quarters to capitalize on this return to normal.
With a very disruptive event (hopefully) behind us, Nike’s management is confident about the company’s future prospects and remains committed to its long-term financial strategy. targets high-digit revenue growth and the percentage of teenagers earnings per share growth.
Rely on digital prowess
One of the main factors that lead Nike this year is its intense focus on technology. The company’s Consumer Direct Acceleration The initiative, which was announced last summer, focuses on creating transparent customer experiences, optimizing product development, and using data and analytics to improve efficiency.
The pandemic presented Nike with a real stress test, and he passed it with flying colors. Year-over-year e-commerce sales climbed 84% (fiscal year Q2 2021), 82% (Q1 fiscal 2021), and 75% (Q4 fiscal 2020) over the past three quarters, and the member rewards club added a whopping 70 million members around the world since the start of the pandemic.
It is worth highlighting the success of SNKRS in particular, an incredibly successful Nike app used for new versions of sneakers. In the most recent quarter, the company launched its very first product using live streaming, resulting in a full sale of the new shoes in under two minutes. These types of actions will only increase consumer engagement this year and into the future.
Nike is now a truly digital company. Expect it to continue to rely heavily on its technological capabilities to connect more deeply with consumers, strengthening the brand over time.
Assessment is not a concern
The stock is currently trading at a futures price / earnings ratio. report out of 46, something that doesn’t worry me at all given the direction Nike is heading in. It’s worth paying for the highest quality companies – a category Nike certainly falls into.
While it’s hard to predict where any stock will be 12 months from now, I can say with confidence that Nike’s business will be in a better position then. As the pandemic becomes a distant memory, revenues and revenues will grow thanks to the company’s digital focus and consumer engagement efforts over the past year.
Wall Street analysts believe that BPA to augment 89% during fiscal year 2021 and 29% the following year. If you haven’t already, it would be wise to jump on the Nike bandwagon now.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.