Nike And Foot Locker Upgraded On Nike’s Innovation Pipeline
Nike was upgraded to “Buy” from Canaccord Genuity, while Foot Locker was upgraded to “Outperform” by Wells Fargo. Both upgrades were tied to successful recent launches and bright prospects for future ones from Nike.
In a note to clients, Canaccord Genuity analyst Camilo Lyon wrote about Nike, “
After two years of a soft product cycle that led to increased inventory levels, higher discounting, margin compression and market share declines, NKE has regained its footing and is solidly marching back to top form.”
The analyst wrote that Nike’s “Triple Double” strategy has resulted in a “flurry of new innovations” marked by the Vapor Max, as well as a number of high-profile collaborations with Virgil Abloh, Anna Wintour, Kendrick Lamar and Supreme. The brand has increased its focus on the consumer experience through its SNKRS app, NikePlus membership, and other in store/online consumer-centric initiatives. Investments in speed initiatives such as Express Lane are expected to drive positive gross margin gains in the longer term.
The analyst also pointed to signs of a recovery for growth at Jordan, an acceleration of growth expected for Nike Brand in both the North America region and DTC in fiscal 2019, and improving gross margins expected in the years ahead.
Lyon further remarked that Nike’s controversial“Just Do It” anniversary campaign with Colin Kaepernick was “a stroke of genius” that accomplished four positive outcomes.
Lyon wrote, “First, it struck an emotional chord with people that incited a conversation, much as it was intended. Second, it was courageous in that NKE took a stand in support of a social issue where few (if any) companies have of late. Third, it spoke to NKE’s core consumers in a very NKE-esque provocative way that shows it understands them and the issues that matter to them. Fourth, it strengthened the ties with its sponsor athletes by showing them that NKE stands by them. To us, this premeditated move was another subtle but significant sign of NKE’s strength and confidence in its position in the marketplace, one that likely does more good than harm.”
Canaccord raised its rating on Nike from “Hold” to “Buy” and price target from $78 to $95. On Tuesday, Nike’s shares closed at $82.63, up 53 cents.
On Monday, Wells Fargo upgraded Foot Locker to “Outperform” due to improving product from Nike, “an alleviation of the Jordan-brand headwind,” as well as some improving trends in Europe as slow-moving Adidas retro product has been cleared during the second quarter.
Wells Fargo’s lead analyst on the stock, Tom Nikic, wrote in a note that he expects Foot Locker’s comps, which inched up 0.5 percent in the second quarter, to climb about 2 percent in the third quarter and 3 percent the fourth quarter and then accelerate to see growth in the range of 3 to 4 percent over the subsequent 12-24 months due to improved Nike offerings.
https://sgbonline.com/nike-and-foot-locker-upgraded-on-nikes-innovation-success/
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