Nike is 'back in business' — and threatening to reclaim its sneaker crown from Adidas (NKE)

pulse

March 23, 2018 4:16 PM

Nike reported third-quarter earnings that blew past analysts' estimates, signaling optimism of its comeback in the US sneaker market.

The shoe maker's positive forward outlook shows Nike regaining market share from Adidas in the US.

Nike's sales in North America fell 6% in third quarter, though they rose by 13% in Asia and Latin America. Its North American sales growth began slipping last May, when it posted flat results. Last quarter, the company saw a 5% decline in revenue from North America.

The maker of the popular Jordan Brand was nearly written off last year when its sales slumped and it began to lose its "cool factor." An industry watcher said Nike's fall from grace stemmed from the supply of its Jordan Brand sneakers outpacing demand and its inability to get its trendiest shoes to market fast enough.

By contrast, Adidas has been gaining US market share by offering new and differentiated products, reacting quickly to market demand, and outlining a clear strategy under CEO Kasper Rorsted. It's sales soared 74% year-over-as of May.

Yet the tables may be turning back in favor of Nike.

"Several F3Q updates boost our conviction that Nike is finally poised to reverse 2 years of share losses," wrote Michael Binetti at Credit Suisse.

He said the shoe retailer's scaling of new products, positive sales growth guidance, as well as accelerating international momentum supports the "high quality" fundamentals that will precipitate the sneaker maker's comeback.

Binetti reiterated his "Outperform" rating and $78 price target.

Nike's stock was trading at $66.31 per share, and was up 4.47% for the year.

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