When you hear the words "Just Do It," which company do you think of?
We'll give you a hint: It's the name of the Greek goddess of victory.
The answer, of course, is Nike (NKE) , the athletic footwear and apparel giant that ranks as the world's largest shoe company.
The slogan, coined by Dan Wieden, co-founder of the ad agency Wieden+Kennedy a 1988 ad campaign, was chosen by Advertising Age as one of the top five ad slogans of the 20th century.
Nike was listed as the world’s most valuable apparel brand for the ninth consecutive year, according to Brand Finance’s 2023 Annual Apparel 50 Report.
But the company, founded on Jan. 25, 1964, as "Blue Ribbon Sports," has been having difficulties lately.
Nike cut roughly 1,600, or 2%, of its workers and warned that more job cuts might be coming.
“To compete, we must edit, shift and divest less critical work to create greater focus and capacity for what matters most," Nike Chief Executive John Donahoe wrote in a memo obtained by The Wall Street Journal last month.
He also said that the layoffs were a “painful reality” and something that he doesn’t take lightly. He holds himself and other executives accountable for the company's recent performance.
CEO: 'We must be faster.'
During the company's fiscal-second-quarter-earnings call on Dec. 21, Nike Chief Financial Officer Matthew Friend hinted that the company was set to undergo some major changes in the next few years as it looked to save $2 billion in costs.
"In this competitive environment, we need to accelerate our pace of innovation, elevate our marketplace experiences, maximize the impact of our storytelling, and increase our speed and responsiveness, all in service of the consumer," Friend said.
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He said Nike anticipates a restructuring charge of $400 million to $450 million in the second half, primarily related to severance costs, which will be recognized largely in the third quarter.
"Today, we know we must be faster, increasing the pace of innovation, increasing the pace of market to consumer, and increasing our agility and responsiveness," Donahoe told analysts. "To drive this, we'll embrace a significant savings plan to create investment capacity to fuel profitable growth at speed and scale."
He said some areas of potential savings include simplifying the product portfolio, increasing automation and the use of technology, streamlining the organization, and "leveraging our scale to drive greater efficiency."
On March 8, Nike entered into an agreement with Bank of America and other financial services companies for a new 364-day unsecured revolving credit facility of as much as $1 billion, with the possibility of increasing it to $1.5 billion, according to a regulatory filing.
The facility supports working capital and general corporate purposes.
Nike is scheduled to release third-quarter results on March 21. Analysts surveyed by FactSet are expecting the company to post earnings of 75 cents a share on sales of $12.27 billion.
A year earlier, the company earned 79 cents a share on sales of $12.39 billion.
Analyst confident in execution
Some analysts who follow Nike lowered their price targets on March 12 ahead of the company's earnings report.
RBC Capital, which has an outperform rating on the shares, cut its price target by $1.
"We acknowledge competitive dynamics are intensifying, and Nike is transitioning product range rotation," the firm said in a research note. "[However,] we remain confident in execution, gross margin tailwinds and outsized marketing firepower which offers a relatively more defensive sporting goods option."
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The investment firm expects Nike to report third quarter revenue of $12.17 billion.
RBC Capital said that it saw the strongest growth in the Asia Pacific and Latin America region, or APLA, followed by greater China. For other regions, the firm expects “flattish or negative revenue declines.”
Morgan Stanley analyst Alex Straton lowered the investment firm's price target on Nike to $124 from $125 and kept an overweight rating on the shares.
The firm sees upside to third-quarter and fiscal-year EPS on "a low bar" set last quarter.
However, the analyst views equity appreciation as conditioned on increased line-of-sight to Nike's long-term growth and profitability targets, which isn't likely until the fourth quarter or the first half of fiscal 2025, "at the soonest.” the analyst told investors in an earnings preview note.
The firm sees "seemingly overly bearish sentiment" against many potential positive catalysts in the next 12 months, but he thinks the third-quarter report “likely does little to change the narrative on the stock.”
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