Breakfast News: Nike Returns To Its Roots
December 20, 2024
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Source: Image created by JesterAI.
1. New Nike CEO Outlines Recovery Plan
Nike (NKE -1.11%) beat analyst expectations on both revenue and earnings per share (EPS) in the latest quarterly report, but acknowledged the turnaround is going to take time. New CEO Elliott Hill spoke of rectifying recent mistakes, including the souring of its relationships with marketplace retailers and offering too many discounts.
- Beating a low benchmark: Revenue was down 8% versus last year, with EPS down 24%. The direct-to-consumer channel sales took the largest negative hit, with the wholesale channel faring slightly better.
- "We will lead with sport and put the athlete at the center of every decision": Hill stressed a key focus would be going back to the sporting roots of the business, with more investment in running, basketball, training, football, and general sportswear. Running and trainingwear have been a source of strong profitability with competitors such as Hidden Gems rec Lululemon (LULU -0.14%).
2. FedEx Formalizes Freight Decision
Stock Advisor recommendation FedEx (FDX -0.04%) jumped almost 9% in after-hours trading, following confirmation it will be spinning off its freight business, potentially unlocking up to $20 billion in shareholder value.
- Creating a more streamlined operation: Freight is one of the most profitable divisions for the company, but is seen by some investors as unappreciated in the wider group. Spinning it off could pave the way for other internal restructuring to further drive efficiencies.
- Stagnant revenue outlook: The news came as part of a mixed earnings report. Adjusted earnings beat forecasts but management flagged up weak domestic demand, including an 11% drop in freight revenue due to lower shipping volumes. The revenue outlook for 2025 is flat, reflecting some concern this won’t be a quick fix.
3. Next Up: Fed’s Preferred Inflation Gauge
The November reading for Personal Consumption Expenditures (PCE) inflation is due Friday, one of the U.S. Federal Reserve’s favorite inflation measures.
- Starting to trend higher?: Analysts are forecasting the price index to increase year over year from October's 2.3% print to 2.5%. This would be the highest figure since May 2024, adding to growing concerns over inflation.
- Building on Q2 gains: Ahead of the market open, Carnival (CCL 1.43%) will release its latest earnings. Look out for 2025 capacity forecasts and any profitability increase from recent increased pricing, to build on what was a record-breaking previous quarter.
4. Nvidia Hunts for Chip Smugglers
Despite the U.S. recently broadening the ban on the sale of high-end AI chips to China and curbing exports of related products, Nvidia (NVDA -0.02%) is reportedly having issues with chip smuggling.
- Reselling on the gray market: The U.S. Department of Commerce has recently asked the company to ascertain how products have arrived in China and evade detection. It’s believed smugglers have the ability to alter serial numbers or duplicate existing ones.
- Why it matters: Although reselling in Asian markets doesn’t represent a material threat to Nvidia’s finances, it does provide a political headache that could spook investors should tensions escalate between the two nations involved.
5. Foolish Fun
When companies shift to subscription, it can benefit customers that don’t have the up-front capital to invest in one fell swoop – but not always. What product would you least like to see shifted to a monthly subscription model? Discuss with family and friends, or become a member to hear what your fellow Fools are saying.
