Shoe giant Nike (NKE) has been building toward a comeback for quite some time now, and there are signs that it is working. But a new report from the Wall Street Journal suggests that Nike is playing a very dangerous game when it comes to rebuilding, turning to substantial discounts to get ahead. Nike shares were down fractionally in Thursday afternoon’s trading, suggesting that investors are just as concerned.
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Nike took a step that no other major shoe brand did, the report noted. During a major shopping weekend, Nike brought out 30% discounts on most of the shoes it offered through Macy’s (M) at its Herald Square location in New York City. Given that “clearing inventory” has been a major priority of Nike’s since at least October, the move made a certain amount of sense.
After all, nothing clears inventory quite so well as huge sales, which draw customers’ attention even over the complaints of their wallets. But with quarterly sales numbers expected to show the third sales decline in a row, it is entirely possible that Nike’s “fire sale all the time” attitude is starting to hurt the bottom line. Some, like JD Sports’ CEO Regis Schultz, believe that these huge sales will ultimately cheapen the brand and hurt sales down the line.
Calling in Celebrity Help
However, Nike may have a plan to protect against this through celebrity firepower. It recently extended its contract with A’ja Wilson, one of the biggest names in the WNBA right now. A player with the Las Vegas Aces, Sports Illustrated reported that Wilson’s seventh season in the WNBA has been “dominant,” and this makes her an attractive figure in the field.
She is actually the fourth WNBA player ever to win a Most Valuable Player designation by unanimous decision, the report notes. Thus it should come as little surprise that Wilson is in line for one of the biggest shoe deals the WNBA has seen to date. While the numbers were not released in the report, Wilson is in line for her own “signature shoe set,” which should tell enough about the deal on its own.
Is Nike Stock a Buy or Sell?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on NKE stock based on 16 Buys and 14 Holds assigned in the past three months, as indicated by the graphic below. After a 35.57% loss in its share price over the past year, the average NKE price target of $89.96 per share implies 17.14% upside potential.
