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NIKE Losing Sheen: Stock Grapples with Multiple Headwinds

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NIKE, Inc. NKE is one such stock which should not be part of your portfolio, as it has been losing sheen for now. Sluggish future orders, foreign exchange headwinds and competitive pressure remain major concerns for the company. So far in 2016, this Zacks Rank #4 (Sell) stock has been down nearly 17% compared with the Zacks categorized Consumer Discretionary industry that has increased approximately 6.2%. Let’s delve deeper to know what’s leading to the bearish run for the stock.

Slowdown in future orders is the primary concern for Nike, which has been denting the company’s performance. While the growth in future orders still reflects rising demand for the company’s products, it lagged expectations as tough competition from rivals weighed in on the demand for NIKE’s basketball shoes and casual footwear.

NIKE faces intense competition in both domestic and international markets. Competition from rivals like Under Armour, Inc. and Adidas AG ADDYY (including Reebok) continue to be a pressing concern for the company, which is losing its market share to these sporting bigwigs. Alongside, a shift in consumers’ tastes and preferences toward more fashionable assortments is also playing foul for NIKE, whose ‘athleisure’ popularity seems to be losing ground.

Additionally, NIKE’s quarterly performance and momentum of its business growth are being muted by the unfavorable currency fluctuations.

All these factors urged management to provide a drab second-quarter fiscal 2017 and full-year view, reflecting gross margin contraction and higher costs in the last reported quarter.
While the company grapples with multiple headwinds, it remains confident of its growth drivers. These include efficient supply chain, a great sync between digital and physical worlds, constant innovations and strategic investments, going forward.

NIKE INC-B Price and Consensus


NIKE INC-B Price and Consensus | NIKE INC-B Quote

However, only time will tell whether these endeavors are enough to bring the company back in investors’ good books when it reports second-quarter fiscal 2017 results..

Stock that Warrant a Look

A better-ranked stock in the same industry includes Francesca's Holdings Corporation FRAN, which has surged a whopping 105.1% in the past six months. The stock has a long-term earnings growth rate of 13.8% and carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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