Nike (NKE) executives are usually a guarded bunch, but with shares in the doldrums, that longtime playbook was clearly scrapped on Tuesday.
Led by admitted product "nerd" and CEO Mark Parker, Nike's earnings call dangled a ton of carrots in front of the noses of bulls yearning to get back into the beaten-up Dow component (especially with a decent yield of 1.5%). Normally, Nike doesn't offer any carrots to analysts on conference calls -- after all, this is Nike and in the mind of executives it only wins battles with rivals. So, to suggest anything but winning would be a slap in the face to an always confident group of people stationed in Oregon.
Here are several of the carrots that got me most intrigued:
Upbeat on innovation: Executives sure appeared as if they have been reading analyst reports saying Nike is no longer innovating. The company went to great lengths to specifically detail what new innovations across several product categories are ahead. Moreover, the company teased more releases of self-tying sneakers, which indeed will get the sneaker bloggers jazzed up (not yet analysts, however, as these types of pricey shoes are still being released in limited quantities and in a limited number of channels).
Optimistic on basketball: Nike highlighted growth in new basketball styles from top brands such as Kyrie Irving, LeBron James and Kobe Bryant. Good to see amid a push by Nike to be more competitive on price. Jordan brand remains healthy, too. The company went on to proclaim its basketball business is "back." It must be seeing something in the numbers and development pipeline to raise the expectations bar on a business under attack from Under Armour (UA) and the shift toward Adidas and Puma lifestyle sneakers. (Under Armour is part of TheStreet's Growth Seeker portfolio.)
Confident inventory issues are being addressed: Nike's longtime problem with excess inventory finding its way to off-price channels such as TJ Maxx (TJX) appeared to abate somewhat in the quarter. Executives sounded confident on the company's supply/demand equation finally returning to a degree of normality within the next six to nine months. Possibly bad news for TJ Maxx, which has been getting some amazing Nike inventory, but good news for the sneaker giant. (TJ Maxx is part of TheStreet's Action Alerts PLUS portfolio.)
Factor in Nike calling out decent revenue growth for the third fiscal quarter (up by a mid-single-digit percentage) and reiterating its full-year sales outlook (up by a high-single-digit to low-double-digit percentage) and there are reasons to finally add Nike shares to your shopping list.
But that isn't the same as saying buy up the stock on any weakness or chase it if it should start trending higher in January. For all its wins on the earnings call, Nike still didn't alleviate a number of concerns, including: 1) weak future orders growth in North America amid a fundamental upheaval at major retailers, such as Macy's (M) closing stores; 2) the impact of new punitive taxes on imported goods under the Trump administration (Nike has long minted money by making its products in emerging markets); and 3) how long it will take to get beyond the picked-up level of discounting on Nike products across the retail landscape (minus its prime retail stores).
In short, show us more, Nike.
