NIKE, Inc. - NYSE:NKE - Comprehensive analysis
Nike's shares have declined by approximately 20% over the past year and are currently trading at significant discounts to our valuation. Fiscal year 2025 was one of the company's most challenging periods in decades, with issues further intensified by increased tariffs on U.S. imports. Despite these challenges, we believe CEO Elliott Hill, who took on the role in October 2024, is implementing effective strategies to enhance Nike's brand value, which underpins our wide moat rating. Hill's overarching strategy, termed "Win Now," focuses on strengthening the company's ties to global sports—its greatest advantage—while reducing unnecessary costs. In the long term, we anticipate that Nike can achieve mid-teens EBIT margins by boosting full-price sales, launching new merchandise, and expanding sales in high-margin markets. Under former CEO John Donahoe, Nike emphasized direct selling over product development, which inadvertently opened doors for more innovative competitors in key categories. Additionally, demand for sportswear in critical markets such as North America (44% of fiscal 2025 revenue) and Greater China (15%) has softened due to economic challenges. Hill, who has 32 years of experience at Nike, including his last role as president of consumer and marketing before retiring in 2020, possesses extensive insider knowledge. He faces significant work ahead to strengthen relationships with wholesale partners and enhance full-price selling through company-owned digital channels, but we believe he is capable of meeting these challenges. To manage inventory ahead of new product launches, Hill has increased discounting, particularly in footwear, as Nike reduces reliance on overexposed lines to make way for more competitive offerings. As a result, near-term performance may be below expectations. However, we project that Nike will return to sales growth and improve operating margins by fiscal year 2027.
Free evaluation through quantitative algorithms NIKE, Inc. - NYSE:NKE
Growth-Scoring Model Detail
Total Revenue Growth Over Prior Year | -4.97 | Market 12 Sector 24 |
Gross Profit Growth Over Prior Year | -3.31 | Market 18 Sector 25 |
EBITDA Growth Over Prior Year | -0.75 | Market 29 Sector 56 |
EBITA Growth Over Prior Year | -1.65 | Market 30 Sector 53 |
EBIT Growth Over Prior Year | -2.38 | Market 32 Sector 51 |
Earnings from Cont. Ops. Growth Over Prior Year | -7.79 | Market 25 Sector 35 |
Net Income Growth Over Prior Year | -7.79 | Market 25 Sector 35 |
Normalized Net Income Growth Over Prior Year | -0.38 | Market 37 Sector 51 |
Diluted EPS before Extra Growth Over Prior Year | -5.35 | Market 29 Sector 40 |
A/R Growth Over Prior Year | 10.87 | Market 65 Sector 74 |
Inventory Growth Over Prior Year | 0.03 | Market 53 Sector 38 |
PPE Net Growth Over Prior Year | -6.21 | Market 11 Sector 31 |
Total Assets Growth Over Prior Year | 2.03 | Market 36 Sector 53 |
Tangible Book Value Growth Over Prior Year | -0.43 | Market 25 Sector 34 |
Common Equity Growth Over Prior Year | -0.77 | Market 24 Sector 40 |
Cash from Ops. Growth Over Prior Year | -15.39 | Market 28 Sector 46 |
CAPEX Growth Over Prior Year | -34.95 | Market 14 Sector 20 |
Dividend per Share Growth Over Prior Year | 8.63 | Market 72 Sector 83 |
Levered Free Cash Flow Growth Over Prior Year | -7.45 | Market 40 Sector 63 |
Unlevered Free Cash Flow Growth Over Prior Year | -7.21 | Market 35 Sector 60 |
Profitability-Scoring Model Detail
Gross Margin % | 44.7 | Market 53 Sector 71 |
SG&A Margin % | 32.6 | Market 84 Sector 57 |
EBITDA Margin % | 13.8 | Market 31 Sector 74 |
EBITA Margin % | 12.19 | Market 33 Sector 80 |
EBIT Margin % | 12.08 | Market 34 Sector 81 |
Earnings from Cont. Ops Margin % | 9.98 | Market 46 Sector 89 |
Net Income Margin % | 9.98 | Market 46 Sector 89 |
Net Income Avail. for Common Margin % | 9.98 | Market 46 Sector 89 |
Normalized Net Income Margin % | 8 | Market 39 Sector 85 |
Levered Free Cash Flow Margin % | 10.62 | Market 55 Sector 93 |
Unlevered Free Cash Flow Margin % | 10.98 | Market 53 Sector 92 |
Return on Assets % | 9.84 | Market 75 Sector 83 |
Return on Capital % | 14.11 | Market 67 Sector 83 |
Return on Equity % | 34.7 | Market 70 Sector 78 |
Return on Common Equity % | 34.7 | Market 70 Sector 77 |
Total Asset Turnover | 1.3 | Market 73 Sector 61 |
