August 6, 2019

NKE – Market expectations are for Uniform ROA to expand to new peaks, however management is concerned about growth, consumer engagement, and innovation


  • NIKE, Inc. (NKE:USA) currently trades at historical highs relative to UAFRS-based (Uniform) Earnings, with a 28.4x Uniform P/E, implying bullish expectations for the firm. However, management may be concerned about growth in China, consumer engagement in Nike Digital, and product innovation
  • Specifically, management may be concerned about the sustainability of their leadership position in bra sales in North America, and they may lack confidence in their Joyride technology. Furthermore, they may lack confidence in their ability to grow their international Nike App user base, and they may be concerned about the sustainability of improved retail engagement rates in the Nike App. Moreover, management may lack confidence in their ability to continue innovating their footwear, and they may be exaggerating the value of their partnerships with Tmall and WeChat. In addition, management may be concerned about the sustainability of growth in China and they appear concerned about ongoing SG&A headwinds.
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