Some of Nike Inc.’s problems have been problems for companies that try to sell things that people want but don’t need. The company will report its first quarterly results under a new CEO on Thursday. In other words, people don’t want to buy things like new sneakers as much because of higher living costs, especially since 2022.
There are also problems that are unique to Nike. Lifestyle sneakers from the past, like Dunks and Air Jordan 1, lost some of their appeal as they became too common and dull. Brands like Hoka became more of a threat. Someone in the know called it “Jordan retro fatigue.”
In other places, the company has run the risk of complaints from sneaker fans. It tried to get people excited about buying new shoes and other gear, but it didn’t work. Finally, John Donahoe was fired as CEO earlier this year. Bloomberg wrote about him as “The Man Who Made Nike Uncool.”
But now, as Nike NKE -1.61% gets ready for its first earnings report since Elliott Hill became CEO in October, Wall Street is still not expecting much.
This month, Lorraine Hutchinson, a research note author at BofA, said, “The question going into 2Q earnings is whether new CEO Elliott Hill will lower expectations even more.”
She went on to say, “We think investors would welcome a clean slate from Hill, and that missing sales and [gross margins] after this quarter would derail the building bull case.”
However, experts think that demand will stay low and that any improvement may not happen for a while. So far this year, Nike stock has dropped 28.9%.
In a note sent last week, Stifel analyst Jim Duffy said, “We expect Mr. Hill is upbeat and bullish about the long-term potential for the Nike and Jordan brands but honest about the challenges that lie ahead.” Even so, he said he was looking forward to “few tactical specifics.”
“It’s good to see someone from inside Nike as CEO, but Nike is still in reset mode, and we expect it to take time to bring the company culture back to life and ultimately get the brand moving again,” he said.
There is also the diplomatic trouble with the sneakerhead group. At Seton Hall University, Danielle Zanzalari is an assistant professor of economics. She told MarketWatch that Nike’s recent legal actions, such as a court battle against the online sneaker marketplace StockX over fake Nike shoes and a trademark dispute with custom shoemaker The Shoe Surgeon, had hurt its reputation among its biggest fans.
It should be very important for Hill to fix Nike’s relationships with key players in the used sneaker market, she said..
This week in money made
Price increases hurt buyers, but companies expect their profits to keep going up as long as they keep those prices high.
A new report from FactSet released on Thursday says that Wall Street experts think that the S&P 500 Index will have 9.5% earnings-per-share growth for the whole year of 2024. For the past 10 years, that’s been the average rate of growth. That would be the fourth year in a row of growth.
Still, four of the top five companies expected to make the most money in 2024 are huge tech companies: Amazon.com Inc. AMZN -0.66%, Alphabet Inc. GOOGL -1.11%, Facebook parent company Meta Platforms Inc. META -1.66%, and Nvidia Corp. NVDA -2.25%. A lot of people are excited about artificial intelligence technology, which has been good for those businesses. However, they are faced with concerns about the huge amounts of money and energy needed to run that technology, as well as its general quality.
In a report from FactSet, experts say that net profit margins will be 12% in 2024. This is higher than the 10-year average of 10.8% and about the same as they were in 2021 and parts of 2022, when the economy was in chaos because of problems with supplies and the war in Ukraine. According to the study, analysts think the S&P 500 Index SPX -0.00% will end the year above 6,600.
General Mills Inc. GIS +0.92%, Conagra Brands Inc. CAG +0.46%, and Micron Technology Inc. MU +4.34% are some other companies that report during the week. Winnebago Industries Inc. (WGO -2.15%), which makes RVs, and Carnival Corp. (CCL -1.07%), which runs cruise ships, both report.
The call you need to mark on your calendar
FedEx: On Thursday, the package delivery giant FedEx Corp. will release its quarterly numbers. Executives’ comments could give us more information about the holiday shipping rush, when people and businesses are trying to save money on delivery costs because of rising prices. The company has tried to cut billions of dollars in costs and is having its freight business looked at, but these steps haven’t always helped shares. For another thing, FedEx and the U.S. Postal Service stopped working together to ship packages in September. Even though things have been rough, the stock is up 12% so far this year.
The number to pay attention to
Lennar home sales: Yes, the Federal Reserve has lowered interest rates, and they’re likely to do it again this week. But some experts say it might still be a while before the housing market warms up and people can start to feel some relief from the high prices of homes. Wednesday, homebuilder Lennar Corp. LEN -0.69% will report its quarterly numbers, which will let us know how things are going.
