An expert says that Nike Inc. is attempting to regain its dominant position as the world’s premier sportswear company in the face of uncertainty in its China business and increased competition as it moves away from traditional wholesale channels.
David Swartz, a senior analyst of consumer equity and investment research at Morningstar, told BNN Bloomberg Tuesday that all eyes will be on the Oregon-based company when it reports first-quarter earnings after markets close.
“I think we’re going to hear a lot about the new products that are going to be coming out over the next year, as well as Nike’s efforts to improve relationships with wholesale partners,” Swartz said.
“Nike has struggled over the past couple years in a lot of ways but one of the biggest problems has been that it has moved towards its own e-commerce and store channels and away from wholesale partners.”
Swartz said that this shift has “seemingly caused a big rift” between Nike and its major retail partners, which has also opened the door for competitors to claim shelf space previously occupied by the sportswear giant.
He added that Nike has made a number of C-suite changes in an attempt to mitigate recent losses, including the appointment of a new CEO last month.
“Nike has either brought back or promoted five long-time executives, so Nike’s really trying to get back to where it was as the dominant sportswear company,” Swartz said.
Swartz said that investors will also be keen to hear what Nike management has to say about its China business, which he called one of its “biggest problems” in recent years.
“Nike has thousands of franchised stores in China and it’s a very important growth market for sportswear that has been soft recently,” he explained.
Swartz said that despite those concerns and the recent handwringing over Nike’s disappointing sales forecast in June, he believes the company is still undervalued, and that demand in China will soon pick back up.
“One of the big drivers I think over the next many years is the sportswear market in China. It is the second largest market in the world already behind the U.S.,” he said.
“Marathons are huge there, we just saw China did very well in the Olympics, so it’s really a growth market for all sportswear companies and Nike is the number one company in the market.”
