NKE

Thinking Slow: 3 Research Blind Spots That Changed the Investment World

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Dear members: — Daniel Kahneman in his text Thinking, Fast and Slow (1) divided the human psyche into two systems. The first system is instinctive and emotional, often set on autopilot, while the second system is slower and more logical, requiring a calculating conscious. Many of the maxims the investment world takes for granted today suffer from conclusions that are made rapidly, almost without thinking, driven by our first system, creating what I call research blind spots. — In World War II, Allied bombing raids were suffering from very high casualty rates. It was estimated that for those pilots that were flying at the beginning of the war, only about 10% survived, a terrible loss rate. Bombing was crucial to the Allied … Read more

Nike Has Posted 23 Consecutive Years of Increasing Dividend Payouts

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Image Source: TradingView By Brian Nelson, CFA Nike (NKE) recently reported decent first quarter fiscal 2026 results with both revenue and GAAP earnings per share beating the consensus forecast. First quarter revenues of $11.7 billion were up 1% on a reported basis, but down 1% on a currency neutral basis. Nike Direct revenues fell 5% on a currency neutral basis, while wholesale revenues advanced 5% on a currency neutral basis. Revenues for the Nike brand were flat on a currency neutral basis in the quarter, while sales for Converse dropped 28% on a currency neutral basis. Its gross margin fell 320 basis points, to 42.2%, due to pricing pressure, higher discounts and channel mix, as well as higher tariffs, while … Read more

Nike’s Fiscal Fourth Quarter Better Than Feared

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Image: Nike’s shares have been pummeled of late. By Brian Nelson, CFA On June 26, Nike (NKE) reported better than expected fourth quarter fiscal 2025 results with revenue and GAAP earnings per share exceeding the consensus forecasts. Fiscal fourth quarter revenues were $11.1 billion, down 12% on a reported basis and 11% on a currency-neutral basis. Nike Direct revenues were down 14% on a reported and currency-neutral basis in the quarter, while wholesale revenues fell 9% on a reported and currency-neutral basis in the period. Quarterly revenues for Converse fell 26%. Gross margin declined 440 basis points in the fiscal fourth quarter, to 40.3%, while diluted earnings per share fell 86% in the quarter, to $0.14. Management had the following … Read more

3 Undervalued Stocks to Consider Buying Now

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Dear readers:   With the markets retracing most of their recent drawdown, we’re taking a victory lap as we didn’t panic, nor should have you. We highlighted our wait-and-see approach amidst the worst of the pullback, and we expect the Magnificent 7 (large cap growth and big cap tech) to continue to propel the markets higher, as they have done.   We’ve been busy rolling valuation models as we finetune our assumptions for a great number of companies under coverage. While doing so, we came across three undervalued stocks that are also included in the simulated newsletter portfolios. We think they’re prime for highlight.   The three stocks are UnitedHealth Group (UNH), Nvidia (NVDA) and Alphabet (GOOG). We spend a lot of time on discounted cash-flow valuation, … Read more

Dick’s Sporting Goods to Acquire Foot Locker

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Image: Dick’s Sporting Goods’ shares sold off on its announcement that it would acquire Foot Locker. By Brian Nelson, CFA On May 15, Dick’s Sporting Goods (DKS) announced that it would acquire Foot Locker (FL) in a transaction that implies an equity value of $2.4 billion and enterprise value of $2.5 billion. Foot Locker shareholders can elect to receive either $24.00 in cash or 0.1168 shares of Dick’s Sporting Goods common stock for each share of Foot Locker stock they own. Dick’s intends to finance the acquisition through a combination of cash on hand and new debt and is expected to close in the second half of 2025. Dick’s intends to operate Foot Locker as a standalone business unit within … Read more

Magnificent 7 Earnings Reports Not Bad Thus Far

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By Brian Nelson, CFA   Shortly after Trump’s Liberation Day, where the President unveiled lofty tariffs on numerous countries, we released our wait-and-see outlook for the equity markets, which thus far has proven to be the right move, with the markets largely recovering from the depths reached in April. The S&P 500 (SPY), for example, is down just 3.3% year-to-date, excluding dividends.   A lot has happened since Liberation Day, including easing of tariffs to a 10% baseline for most, if not all, countries, with the key exception of China, where tariffs remain extremely elevated and prohibitive. Many countries are now reportedly negotiating trade agreements with the White House, and we expect China to be added to that list soon, even if … Read more

Trump Tariffs Higher than Expected; What We’re Doing

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By Brian Nelson, CFA The Trump tariff increases came in larger than what we were expecting, and it remains to be seen how they will flow through the global economy, as we monitor potential retaliatory tariffs from other countries. As it relates to the equity markets, we’re taking a wait and see approach at the moment as we monitor new policy changes related to trade, immigration, fiscal (tax), and regulations. In short, we’re not overreacting to the sell off as we won’t have a great handle on the tariff impact to companies for a few quarters when they report results post-tariff increases. That said, we’re expecting continued market volatility, with meaningful risk to the downside, before trade uncertainty alleviates in … Read more

Nike Faces Continued Revenue Declines

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Image: Nike’s shares remain under pressure. By Brian Nelson, CFA On March 20, Nike (NKE) reported better than expected third quarter fiscal 2025 results, but the firm’s outlook signaled continued difficulties. Third quarter revenues were down 9% on a reported basis and 7% on a currency-neutral basis. Nike Brand revenues fell 9% on a reported basis and 6% on a currency-neutral basis, as the firm faced declines in all geographies. Nike Direct revenues dropped 12% on a reported basis and 10% on a currency-neutral basis. Wholesale revenues fell 7% on a reported basis and 4% on a currency-neutral basis. Revenues for Converse dropped 18% on a reported basis and 16% on a currency-neutral basis.   Its gross margin tumbled 330 … Read more

Nike’s Revenue Under Considerable Pressure; Turnaround Will Take Time

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Image: Nike’s shares have been under considerable pressure as sales results disappoint. By Brian Nelson, CFA Nike (NKE) reported second quarter earnings on December 19 that beat on both the top and bottom lines. However, quarterly revenues still fell 8% on a reported basis and were down 9% on a currency-neutral basis. NIKE Brand revenues fell 7% on a reported basis and 8% on a currency-neutral basis. NIKE Direct revenues dropped 13% on a reported basis and 14% on a currency-neutral basis, while wholesale revenues fell 3% on a reported basis and 4% when holding currency neutral. Converse revenues declined across all territories, falling 17% on a reported basis and 18% on a currency-neutral basis. Nike’s gross margin dropped 100 … Read more

Foot Locker Talks of a More Promotional Environment, Softening Consumer Spending

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Image Source: Foot Locker By Brian Nelson, CFA Foot Locker (FL) reported lower-than-expected third quarter results on December 4, with revenue and non-GAAP earnings per share coming in below the consensus forecasts. The company also lowered its 2024 sales and non-GAAP earnings per share outlook. Total revenue fell 1.4% year-over-year (down 2.2% on a constant currency basis) in the quarter, with comparable store sales up 2.4%. Foot Locker and Kids Food Locker experienced comparable store sales growth of 2.8%, while Champs Sports and WSS experienced comparable store sales growth of 2.8% and 1.8%, respectively. Foot Locker experienced gross margin expansion of 230 basis points year-over-year in the quarter, but the company’s non-GAAP earnings per share of $0.33 was lower than expectations. … Read more