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Nike’s Big Leap


Image source: Giphy.com

What's going on?

Nike’s stock jumped 11% on Friday after the company reported better than expected sales and profits on Thursday (tweet this) – and it had some good news for later this year…

What does this mean?

Perhaps the most important news was that Nike did not decrease its sales expectations for later this year. Given its disappointing first quarter of the year, no change in its expectations implies that it thinks sales will accelerate in the latter half of 2017. Investors were worried that Nike’s sales may be under more of a threat due to things like increasing competition in the athleisure space and the disruption caused by the rise of ecommerce – but strong sales growth outside of the US helped beat investors’ expectations.

Why should I care?

For markets: Nike is going to have to “just do it” later this year.

Nike’s management bought its stock price a summer reprieve with its unchanged guidance for later this year, but that increases the pressure on the crucial “back to school” and holiday sales seasons – so expect lots of investor focus on Nike’s performance in the latter half of 2017. A failure to live up to current expectations would likely reignite concerns with the stock price.

The bigger picture: Nike is investing in “growth” – which means product innovation, speedy delivery and more direct interactions with consumers.

As one would expect, Nike spends a ton of money on creating new products, e.g. its Air VaporMax, and it’s counting on them to help deliver the acceleration of sales that it expects later this year. It’s also investing in making new products available much more quickly and using technology to engage with customers more directly (for example, making exclusive sneaker styles available only to Nike users who unlock them through a Nike app). The idea is that these sorts of experiential initiatives will drive digital sales growth. Ultimately, it’s these kinds of investments that will likely determine Nike’s success in the coming years.

Originally posted as part of the Finimize daily email.

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