On Thursday, we’ll find out whether NIKE’s stock (NYSE:NKE) got off to a good start in its new fiscal year. After the closing, the shoe king will publish first-quarter profits.
Following a forgettable fiscal 2022 that restored Nike’s stock (NYSE:NKE) to pre-pandemic levels, Wall Street anticipates a slew of problems to Nike’s bottom line.
The good news is that the company’s toughest days are likely behind it. Nike’s stock (NYSE:NKE) is expected to return to profit growth in the second half of fiscal 2023, according to experts.
What’s the Deal With Nike?
Nike’s list of challenges begins in China, where Covid lockdowns have hurt profits. Last quarter, sales in the crucial growing area fell 19%, affecting more than half of Nike’s regional operations. Nike’s pullout from Russia, albeit a minor portion of the company, hasn’t helped Nike’s stock (NYSE:NKE) either.
In North America, Nike is still being harmed by supply chain problems, which have hindered its ability to send items to wholesalers and stores. To make things worse, shipping commodities across the globe is becoming more expensive, despite decreased travel times.
Unfavorable foreign currency rates are another critical impediment. The rise of the US dollar has resulted in lower sales. It will continue as the dollar strengthens and Treasury rates rise.
All these contributed to Nike’s stock (NYSE:NKE) trading roughly 50% below last year’s record high as it enters Q1 results.
What is Nike’s Growth Plan?
The crucial conclusion here is that Nike does not face a supply shortage. Consumers have shown a propensity to purchase any Nike clothing they can get their hands on, even in an inflationary economy.
Nike’s direct-to-consumer strategy should resume once conditions improve. This is the crucial pillar of the growth plan, and it is working despite the challenging macro environment.
Nike is also expanding its digital environment to capitalize on two significant consumer trends: 1) an increase in online buying and 2) an increase in interest in health and wellbeing.
Is Nike’s Stock Price Too Low?
As a result, Nike obviously has areas of strength in important development sectors such as DTC and digital. This demonstrates that the Nike brand is as strong as ever and that people are eager to purchase Nike even when prices rise. The issues stem from the spending side of the ledger. Fortunately, symptoms are just transient. Nike, on the other hand, has lasting power.
Nike’s stock (NYSE:NKE) has commanded a premium P/E ratio of about 46x during the previous five years. They are now valued at 26 times trailing earnings. Given the abundance of near-term uncertainties, the discount may be justified. However, when the dangers fade one by one, expect the multiple to return to its historical average—and Nike to become more affordable.
Featured Image- Megapixl @ Mohammedsoliman4
Author Okoro Chinedu 
