Editor's note: Shares of Nike have risen almost 23% since Hedgeye Retail Sector Head Brian McGough added it to Investing Ideas on 7/26/13. The S&P 500 is up approximately 7.5% in that time. Please see below McGough's explanation why he is removing NKE from Investing Ideas.
We liked this Nike quarter about as much as we like week-old sushi.
Sure, the quarter definitely had some redeeming qualities, like a solid 13% futures growth rate, a beat on the gross margin line, and really encouraging signs out of Western Europe. But the reality is that the company put up a less than impressive 8% top line growth rate, and managed to translate that into a whopping 4% EPS growth rate.
It missed our estimate, and we were hardly aggressive in our assumptions.
Maybe we're being a little hard on Nike, as it has earned its spot as the dominant brand in this space, but the reality is that the company has put together such a fantastic string of results for so long (and has the multiple to match), and putting up a mere 4% growth rate is so….Adidas.
If Nike wants to maintain its standing as one of the preeminent global companies and brands, its going to have to push the envelope a bit more going forward. We wouldn't be buying it here, and might go the other way if it bounces.