Against the backdrop of a stock market ravaged by impeachment concerns, investors were amazed how a company with massive China exposure looks to have wholly evaded any ill-effects from President Trump’s trade war.
Speaking directly to the company’s stellar numbers, CEO Mark Parker addressed Nike’s ability to successfully navigate the imposition of tariffs on exports between China and the United States.
One of Nike‘s most significant advantages in dealing effectively with rising export costs is that its sales in China have been robust. There is no need to endure tariffs when you manufacture and sell an increasing number of goods in Greater China.
Any concerns that Trump’s robust approach to Chinese negotiations would dent enthusiasm for U.S. brands have been put to bed by this earnings report. A whopping 22% increase in China sales demonstrate that the nation’s love affair with U.S. sports (particularly the NBA) continues to be as strong as ever.
While investors in Nike’s stock are thrilled with the resilience of the brand, the question is whether the continued presence of the trade war will put a dent in sales. According to the following quote from Andy Campion, executive vice president and chief financial officer, expectations remain high that a messy macro environment shouldn’t be too much of a burden for the clothing behemoth, as he writes,
“Our targeted strategic investments are accelerating NIKE’s digital transformation and extending our competitive advantage. Even amidst the increasingly volatile macroeconomic and geopolitical environment, we expect our unrelenting focus on better serving the consumer to continue fueling strong, broad-based growth across our global portfolio.”
Bullish news for NKE also came from women’s sports. The company’s efforts to support women’s soccer paid off in a big way after the U.S. won the recent world cup. This sent apparel sales for the event soaring as most of the teams sported Nike logos.
Aligning its brand with social justice and racial equality, Nike’s advertising efforts have focused on inspiring young women and athletes from minority backgrounds. This angle has often drawn the ire of conservatives, with Colin Kapernick’s endorsements particularly poorly received on the political right.
Despite these criticisms, Nike’s bold strategy continues to pay off, firming its core consumer base. These factors and the reality that the shoemaker continues to employ a heavy Chinese presence have driven President Trump to attack the company in the past. Cautious investors will be nervous that the stock’s recent success makes it an attractive target for the tweeter-in-chief.
Before the earnings release, Nike’s stock had been unable to even test $90 per share. Now trading at $92.20, bulls are in uncharted waters with no resistance overhead. Traders will be paying close attention to momentum indicators and psychological levels to try and pick a potential sticking point for the uptrend.
Last modified: September 23, 2020 1:03 PM