NIKE Displays Strength on Digital & International Expansion
NIKE, Inc. NKE seems to be in good shape, thanks to strength in the company’s digital capabilities and international business, particularly Greater China. Moreover, the company’s Consumer Direct Offense strategy, which positions it to cash in on the strong global demand for athletic footwear and apparel, has been gaining investors’ faith.
The Zacks Rank #2 (Buy) company has rallied 11.6% in the past three months, compared with the industry’s 10.4% rise and the broader sector’s 5.8% growth.
Growth Catalysts
NIKE is focused on accelerating digital advantage to capitalize on its 2X Direct strategy. The company is benefiting from superior digital services and expansion of the digital ecosystem internationally. Moreover, it continues to leverage its mobile apps, including NIKE app and SNKRS app, which are presently live in more than 20 countries. In addition, the company is investing to connect its retail stores with the NIKE app, which mainly focuses on personalization and convenience. These newly-launched apps and superior digital services will continue to bolster growth at the company’s e-commerce platform. In second-quarter fiscal 2020, NIKE digital revenues improved 38% on a currency-neutral basis.
NIKE’s international business continues to be strong, led by impressive growth in Greater China and digital advantage from the launch of mobile apps. Despite tariff-related concerns, the company saw the 22nd straight quarter of double-digit growth in Greater China in the fiscal second quarter. Growth in the region is expected to continue on strength in the company’s digital efforts and other marketing channels. Also, its North America business is experiencing solid momentum for a while, benefiting from constant efforts to transform the North America marketplace as well as strength in NIKE Direct and key wholesale partners.
In sync with its Triple Double and Consumer Direct Offense strategies, management continues to build momentum across operating regions by making the right product available at the right time and establishing a direct connection with consumers. The company is focused on the key aspects of the triple-double strategy — 2x innovation, 2x direct and 2x speed. Powered by this strategy, the company is doubling innovation as it creates and scales new product platforms. Smooth execution of the offense strategy has helped the company deliver strong currency-neutral revenue growth, which is expected to continue ahead.
Wrapping Up
The aforesaid initiatives, including constant efforts to expand internationally and digitally, coupled with the company’s consumer offense strategy will help maintain momentum. However, escalating SG&A costs might strain margins and profits to some extent.
Stocks to Watch
Deckers Outdoor Corporation DECK has an expected long-term expected earnings growth rate of 12.1% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
lululemon athletica inc. LULU has an impressive long-term expected earnings growth rate of 18.8% and a Zacks Rank of 2.
Ralph Lauren Corporation RL, also a Zacks Rank #2 stock, boasts an expected long-term earnings growth rate of 8.4%.
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