Five Burning Questions For Nike Ahead Of Investor Day

mark-parker
Nike President and CEO Mark Parker.
Getty Images.

The athletic footwear-and-apparel industry’s top-grossing company may seem to have it all figured out, but that doesn’t mean analysts and investors won’t have tough questions for Nike Inc. during its investor day, on Oct. 14.

Ahead of tomorrow’s event, Footwear News has analyzed the company’s performance as well as analysts’ feedback to compile a list of burning questions for the firm.

Here are five questions investors are likely to ask Nike’s management.

1) How do you plan to drive stronger growth in North America?

Nike’s momentum in the region decelerated in Q1, to 1 percent growth, compared with an increase of 6 percent in Q4. While the firm continues to have high hopes for North America, investors will want to know how Nike aims to ramp up sales.

2) What are you going to do to sustain momentum in economically volatile China?

Market watchers were impressed, to the say the least, by Nike’s ability to pull off 30 percent revenue growth in China in Q1 despite the series of economic blows the country has suffered over the past few months. Nike CFO and EVP Andrew Campion reiterated the firm’s bullish view of China during the Q1 conference call.

“While we are very mindful of the macroeconomic volatility in China, our brand has never been stronger and our marketplace has never been more healthy. We have momentum across nearly all key categories, as well as continued strength in our DTC business,” Campion said.

Investors will likely demand more evidence regarding Nike’s long-term growth there.

3) What are your five-year growth targets?

Obviously, Nike’s five-year forecast is a huge area of interest for stockholders.

Citi Research analyst Kate McShane said she believes Nike could issue annual revenue-growth guidance in the 11 percent range through FY19, “which would imply revenues of $46 billion, with digital as an accelerator, brand expansion into new categories, international growth and continued growth in women’s.”

4) Is there an update on your supply-chain strategy?

During the Q1 conference call, Campion addressed supply-chain concerns, referencing the firm’s “manufacturing revolution initiatives,” which he said “optimizes product costs, reduces waste, gets productivity enhancements through lean [systems] and automation.”

The CFO used Nike’s Flyknit technology as an example of the new design methods the company has implemented.

Although these initiatives are in their early stages, investors will want more details on how these new technologies will begin to build scale and help margins.

5) Now that an agreement has been signed, how will the Trans-Pacific Partnership affect Nike?

Nike has not shied away from voicing its support for the expansive TPP trade deal. The U.S. and 11 other Pacific Rim countries reached an agreement on the region’s largest trade deal in history on Oct. 8.

Prior to the closing, Nike’s top management even met with Barack Obama as the President sought to rally the mega-company’s support for the trade partnership.

On Oct. 9, UBS Securities LLC analyst Michael Binetti wrote, “Across our coverage, we believe TPP could be most impactful to Nike — given that 43 percent of Nike’s footwear is made in Vietnam and thus exposed to much higher tariff duties per pair. We estimate that eliminating U.S./Vietnam duties could add 50 basis points to Nike’s [gross margins] and 14 cents in EPS flexibility over time.”