Nike on trial: CEO disappoints; board member buys shares

$NKE -

Nike on trial - the CEO disappoints and who is the board member who bought shares immediately after the crash?

A 20% drop is not taken lightly - let us show you how Nike's decline began:

Is the new CEO a disaster? ❓ Last February, Nike announced the layoff of over 1,600 employees (!) as part of a cost-cutting plan designed to save about $2 billion over the next 3 years.

Two weeks later, Nike CEO John Donahoe held a virtual meeting with all company employees and admitted that the company was not performing at its maximum potential and he felt responsible. 📉

Four months later, the company is changing key components of the CEO's failed strategy. ⚠️

The CEO's mistake? ❌ At the start of the COVID-19 pandemic, Nike realized they could make much more money if they sold their goods through their app, without relying on retail distributors. They cut ties with partners like DSW and Urban Outfitters and tried to sell more products directly to consumers.

This change led to an increase in company expenses such as storage and shipping costs. 📉

New business model - new problems ⚠️ Nike created a new global supply chain process - direct-to-consumer sales - which increased expenses. As a result, the company suffered losses when products did not sell quickly, and the company incurred losses from forced discounts when inventory did not sell fast enough. ❌ (image attached)

Spoiler - (they will soon realize this is the worst mistake they could make, because now they are turning back to their retail distributors)

The message was clear - Nike needs help with sales 🌏 The company realized that the decision to cut ties with retailers was a big mistake - after digital sales reached 30% of the total at the beginning of the pandemic, they declined and did not return to that level.

*In contrast, smaller brands like On, New Balance, and Hoka gained significant market share. ⚠️ (image attached)

Competitors seizing the opportunity? 👀 In early February, Hoka, owned by Deckers Outdoor, appointed former Nike graduates and executives to its ranks to capitalize on the opportunity. 🔔

Nike fights for innovation but failed 🚫 Nike invested in apps like Nike Training and SNKRS and the data derived from them, with the aim of designing and selling products.

Nike hired about 3,500 employees for what the company calls its "Global Technology Group," which includes consumer insights and data analysis. However, during the layoff round it conducted last February, managers reduced management levels in the analytics and insights teams, thereby harming Nike again by drastically cutting its data analysis teams.

Brand value damaged 📉 Nike released more editions of its popular shoe models in an attempt to boost sales - but the move hurt the brand's value as products became less unique.

Nike's financial situation 📊 During the last quarter, Nike showed an increase in inventory, which could indicate problems in distribution and sales. High inventory can affect the company's profitability if it does not find ways to sell products quickly.

- Nike's gross margins also declined over the past year, indicating further problems in cost and revenue management. The decline in profit margins can affect the company's ability to invest in new product development and marketing. ❌

Innovation and collaboration 😀 Despite the challenges, Nike is trying to innovate and improve its offerings through new technologies like 3D printing for custom shoe manufacturing. 👟

Additionally, the company collaborates with companies like Apple to develop joint products in the fitness and health sector. 📱

Future forecasts 😀 Despite the challenges, analysts expect improvements in revenue and profitability and anticipate changes in the business model. 📈

Also, Nike plans to expand into new markets and launch new products in hopes of restoring investor confidence. 😀

In summary: ✏️ Nike faces major challenges and significant changes in its business model.

Competitors are gaining significant market share and Nike is struggling to maintain its position in the market. Management understands the mistakes made and is trying to rectify the situation.

The stock is at a test point and the market is waiting to see how the company will deal with the challenges. 💬

Bonus - 🤫

Board member buys Nike shares immediately after the big crash: 💵 Last Friday, after the big crash, board member Bob Swan bought 2,941 Nike shares worth $226,516 at $77 per share. (image attached)

If the name sounds familiar, it's no coincidence - this is Bob Swan, who served as Intel's CEO and currently serves as a board member at Nike. ⭐️

Interesting fact - 👀 We found that the last time Bob bought Nike shares was in October '23, at a price of $94. In the two months that followed, the stock completed a 30% rise to $120.

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