Nike preview: Back on track and getting a boost from Colin Kaepernick campaign
By Tonya Garcia
Published: Sep 21, 2018 4:56 pm ET
Consumer sentiment is favorable and sold out items rose 61% in the days after the controversial ad
Nike’s consumer sentiment is bouncing back after it fell in the days following the Colin Kaepernick announcement
Nike Inc. is scheduled to announce its fiscal first-quarter 2019 earnings on Tuesday, and analysts are confident that the athletic giant is scoring points with consumers with its merchandise as well as its controversial Colin Kaepernick advertising. Nike NKE+0.21% ignited a firestorm after announcing a marketing campaign that featured the former NFL quarterback. Shares of the company dropped, but rebounded, and sales jumped 31% over Labor Day weekend after the Kaepernick’s selection as a spokesperson was announced.
Prior to the controversy, Nike faced issues in areas like distribution strategy. But with the release of items like the Air Max 270 and a distribution revamp, Nike has momentum that even calls for a boycott hasn’t dampened. “While Nike’s recent advertising decisions have attracted unprecedented attention (Google search index setting new all-time highs for the brand), we expect [fiscal first-quarter] results to be much less controversial based on expectations for continued improvement in North America, ongoing strength globally, and good margin performance,” wrote Baird analysts in a note. Read: These Dow Jones Industrial stocks have been left behind as the index hits a record “With fundamentals accelerating and Nike poised to benefit from a strengthening product cycle that could drive stronger sales and margin performance, we see increasing visibility to an earnings acceleration beyond fiscal 2019 which should support premium valuation metrics.” Baird rates Nike shares outperform with a $90 price target.
Susquehanna Financial Group analysts conducted proprietary checks and found that Nike Sportswear, or NSW, apparel growth is “far more explosive than footwear, and carries higher margins.” NSW merchandise brings together fashion and performance. “Driving home the complete connection between the women’s NSW apparel and recent ‘Just Do It’ marketing campaign, Jenifer Lewis, star of TV’s ‘Black-ish,’ wore a custom Nike sweatshirt on the red carpet at the Emmy’s earlier this week to show solidarity with the marketing campaign,” Susquehanna analysts wrote. “Further, Nike’s own retail operations are beginning to highlight the NSW and women’s NSW in particular.”
Susquehanna rates Nike shares positive with a $100 price target. Nike was even upgraded at Canaccord Genuity shortly after the Kaepernick news. Read: Nike upgraded in the face of Colin Kaepernick ad controversy
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