Nike is Fundamentally Changing the Way We Buy Shoes

Nike, (Ticker Symbol: NKE) the world’s largest athletic shoe maker, announced that it is launching its new service called Nike Fit. Nike Fit will scan users’ feet and determine the correct size shoe for each individual person. The service will be added to its mobile app and in brick and mortar stores in the U.S. in July of this year with plans to expand the service to Europe in August.  Additionally, Nike Fit will help reduce returns allowing more precise sizing for its customers that would traditionally buy multiple shoes and return the ones that don’t fit well.

When Nike Fit customers open their app, they will select a shoe to buy, like football cleats or tennis shoes, and then, instead of selecting a shoe size, the shopper will scan his or her feet using their smartphone.  The scan takes just under 15 seconds before Nike Fit recommends a size for that particular shoe. All of the information, such as length and width, is then saved and stored on the app (down to the millimeter) for later purchases.  This enables Nike Fit to recommend accurate sizes for the customer as shoe sizes may vary with the different styles of shoes. For example, one may wear a size 9 running shoe but a size 10 soccer cleat. Nike Fit will be able to pick up on this information and recommend instantly the proper shoe size for each style of shoe.

Nike’s stock started off 2018 in a four-month-long trading range between the $70.00 and $62.00 price levels.  The stock found some support at its 100-day Moving Average in the second quarter of 2018.  Nike’s stock then proceeded to break out of its trading range and continued to rally 22% before giving the whole move back in the fourth quarter of 2018 led by a disappointing earnings and guidance report in September.

In 2019, Nike’s stock took off to a good start, breaking above its downtrend from 2018 and shooting above both its 100 and 200-day Moving Averages.  The stock continued to rally to an all-time high of $90.00 on April 18th, 2019. Nike put in a top shortly after that while forming a bearish divergence pattern, where the stock makes a higher high in price but the Relative Strength Index makes a lower high(As indicated on the chart by the yellow arrows). Traders and investors sometimes look at divergences for a possible pause within the current trend which can, at times, lead to a reversal, as occurred in Nike’s case.  The stock is currently finding support near its 100-day Moving Average.

(Chart above courtesy of ​www.tipranks.com​)

Based on a survey of 25 analysts offering 12-month price targets, the average price target for Nike’s stock is $92.85. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $82.98.

Nike has been trying to rely less on wholesale partners and has been attempting to sell to customers more directly through its app and brick and mortar stores.  Additionally, Nike is opening two unique stores, Nike Live in Los Angeles and House of Innovation in New York, which will sell products specifically designed for those markets.  Investors in Nike should look to their earnings release on June 27th, before the launch of Nike Fit, for more news on this exciting new application.

 


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