- Getty/Maja Hitij
- Nike’s comeback plan could catapult the brand to the top of the hot athletic apparel market.
- The company is working on lowering costs while raising prices, which could be a winning strategy.
- Watch the company’s stock trade in real time here.
The athletic apparel space is more popular and competitive than ever before, and Nike is going on the offensive to expand its share of the sector.
The company is in the middle of a massive shift in how it does business. Once the king of the sneaker and athletic apparel market, Nike lost its crown because a slow manufacturing process kept it from reacting quickly to customer demands and shifts in taste.
Nike currently has about 1 million human workers in its supply chain, according to Vasilescu. The company is trying to speed up its manufacturing process by introducing more automation, which would also reduce costs and increase margins.
The apparel brand is also trying to rethink how it interacts with its customers. Nike recently said it would be pulling back on relationships with some 30,000 retail partners to focus more intensely on high-quality customer experiences. The brand has already reversed its notorious decision not to sell on Amazon. A focus on selling more directly to consumers is going to be a strong tailwind for Nike, Vasilescu said.
In addition to bettering the customer experience, Nike is taking a play from the tech space and trying to increase the average selling price of its products to increase margins. Apple recently released the iPhone X, one of the most expensive smartphones targeted at a mainstream audience, and the demand for the phone seemed unaffected by its high price.
Nike is trying something similar. Nike’s VaporMax sneaker was priced at $190, and “drove the inflection in… net selling prices,” Vasilescu said. Nike took this success in stride and has plans to release several other new premium product lines with the potential to increase average selling prices.
Vasilescu rates Nike as an “outperform” and has a price target of $72, which is 12.5% higher than its current price around $64.
Nike is up 0.86% this year.
- Markets Insider