- Nike is working to speed up its manufacturing and lower costs, which has put it in a good place in the tough athletic apparel market.
- The company has turned around sales in the US and could see faster growth because of its direct-to-consumer focus.
- Watch shares of Nike trade in real time here.
Nike is trying to jump start its own renaissance.
The company has been undergoing a massive update of its manufacturing pipeline in order to be more nimble and keep costs down, and the effort has seemed to pay off. In a note to clients on Friday, Christopher Svezia, an analyst at investment services firm Wedbush, upgraded Nike to an “outperform.”
“We are bullish on Nike given our increased confidence in an inflection in margin and a return to growth in North America in FY19,” Svezia said. “The cadence of new footwear styles are notably higher vs a year ago and the pipeline embraces more retro and casual silhouettes.”
In an effort to outpace its rivals, Nike has been focusing on increasing the speed and lowering the cost of its manufacturing process. The company currently employs 1 million workers across the globe in its supply chain, and it’s working to automate some of those jobs.
Doing so will lower the delay between finishing a flashy new shoe design to being able to release the product to consumers, which will allow the company to better react to trends in the fashion industry. Increased automation will also allow Nike to increase margins, which Svezia said is key to its growth in the US.
The athletic apparel industry is a tough one to be in right now.Under Armour recently saw a big drop in its stock price after Macquarie suggested the company might have to raise capital to stay afloat this year, as its sales growth has trended negatively in recent quarters.
Nike, on the other hand, is starting to show it can react to new customer demands and is slowly gaining ground against rivals like Adidas and Under Armour. In addition to its faster manufacturing, Nike has been focusing on selling its products directly to the consumer, which has become one of its fastest-growing businesses, according to Svezia.
Svezia raised Wedbush’s price target from $US57 to $US74, an increase of nearly 30%. Nike is currently trading at $US65.39, and has gained about 1% this year.
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