NKE Looks Better on Amazon Boost to Omni-Channel
July 11, 2017
Nike (NKE) was off to the races last Friday after posting a strong earnings beat that shocked Wall Street. Management also confirmed that the company will begin a new relationship with Amazon (AMZN) that could ultimately be a greater part of their omni-channel sales efforts.
In the fourth quarter, Nike saw earnings of $0.60 a share, better than estimates of $0.50 a share and up from $0.49 a share the year prior. Revenue increased 6% year-over-year to $8.7 billion, which also bested expectations of $8.6 billion.
While Nike brand sportswear can already be found on Amazon, those products are being sold through third-party retailers. Through the new pilot test, the company will sell certain items directly on the site, allowing it to access its consumers directly and work to protect against things like counterfeiting.
The shares took off on the news – soaring as much as 12% to a 10-month high – but have since settled into a narrow trading range between $57 and $58. The big question now is what will be the stock’s next catalyst in this ever-changing world of brick-and-mortar retail?
Perhaps a victim of its own success, Nike has made sneakers so popular that they moved from basketball courts to the viewing stands and become a part of the hip fashion scene.
And while the company was missing its own Frankenstein’s monster, its overseas rival, Adidas, which had been written off as nothing more than a player in soccer footwear, picked up on this and brought in big-name stars – not athletes – to propel its move, particularly in America.
I find it ironic that I took my son to a Kanye West concert three years ago and he complained for 30 minutes about Nike dropping his sneaker line. The stock had been ready to pull back big time while Adidas was getting ready rock.
Here we are now and while I am impressed with Nike’s initial deal with Amazon, I think holders of lower-priced shares might consider locking in what I suspect are some pretty solid profits. If you’re a would-be buyer, you may want to wait for more developments and the next round of earnings before committing fresh capital to the name.
Regardless, this is a stock I’m keeping an eye on over the long term. It’s a strong company and I expect it to continue growing for years to come.