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Nike Inc B NKE

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Economic Moat




Coronavirus Slams Wide-Moat Nike’s Q4 Results but Also Brings Its Digital Strategy Into Focus

David Swartz Equity Analyst

Analyst Note

| David Swartz |

Nike’s (May-ending) fourth quarter of fiscal 2020 was massively impacted by the coronavirus pandemic as most of its stores and those of its wholesale partners in North America, Europe, and other parts of the world were forced to close for about two months. Its 38% sales decline in the quarter was greater than our forecast 29% decline and it reported an operating loss, something that did not even happen during the 2008 financial crisis. Yet, we do not think the pandemic will have any impact on the power of the Nike brand, the source of our wide moat rating, and think it highlights Nike’s e-commerce, which jumped 75% in the quarter and reached about $5.5 billion for the year (about 15% of total). While we expect a slow recovery in fiscal 2021 due to widespread discounting of apparel, sequential growth looks likely as about 90% of Nike’s worldwide stores are now open. We do not expect to make any material change to our per share fair value estimate of $98 on Nike and view shares, which dropped about 4% on the report, as fully valued.

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Company Profile

Business Description

Nike is the largest athletic footwear and apparel brand in the world. It designs, develops, and markets athletic apparel, footwear, equipment, and accessories in six major categories: running, basketball, soccer, training, sportswear, and Jordan. Footwear generates about two thirds of its sales. Nike’s brands include Nike, Jordan, and Converse (casual footwear). Nike sells products worldwide and outsources its production to more than 400 factories in more than 40 countries. Nike was founded in 1964 and is based in Beaverton, Oregon.

One Bowerman Drive
Beaverton, OR, 97005-6453
T +1 503 671-6453
Sector Consumer Cyclical
Industry Footwear & Accessories
Most Recent Earnings May 31, 2020
Fiscal Year End May 31, 2021
Stock Type Cyclical
Employees 75,400