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NKE – Market expectations are for record-high Uniform ROA, but management may be concerned about revenue growth, Nike Direct, and SG&A costs

July 30, 2021

  • NIKE, Inc. (NKE:USA) currently trades near historical highs relative to UAFRS-based (Uniform) earnings, with a 30.9x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about revenue growth, Nike Direct, and SG&A costs.

  • Specifically, management may lack confidence in their ability to maintain strong growth in their digital business, bring more precision to the art of product creation, and remain committed to creating long-term value by serving consumers. In addition, they may be concerned about increases in their SG&A for digital marketing, SG&A growth outpacing revenue growth as spending normalizes, and the brand business mix of Nike Direct. Furthermore, they may lack confidence in their ability to keep the consumer at the center of their strategy, sustain revenue growth, and maintain a strong international revenue mix from Korea and China.