I’m officially of the view that Nike is in such a cleansing mode with employees, that it cares far more about fixing two decades of HR wrongs than getting two quarters right. Mark Parker wants to leave a legacy of integrity, intolerance for bad behavior, diversity and trust. Over a 5-10 year period that will matter. If you can invest today on that duration, then I want your job (not really, but really).
But with the second release of firings in as many days (and 6 people in five press releases in a single month), I think that the company will be comfortable enough trading this off for near term results, especially given that it has let go five high profile business-driving people. On one hand it has a deep bench. I hate that term. It's over-used and not always true. But in Nike’s case it’s true. On the flip side the bench is all dudes who grew up in a misogynistic culture. It will have to hire from the outside, which takes time starting from scratch including relocations to Portland.
I still think that the TAIL (3-years or less) call is as powerful as any. But this is turning into a bonafide side-show. The company is doing the right thing in firing all people it knows have behaved badly, instead of just having one scapegoat at a senior level. But there’s a greater chance today than yesterday (and likely even more in the near future as more people are fired) as it relates to TREND results. The morale inside this company is simply awful today -- short sighted, defensive, and dysfunctional.
This name is officially off our Best Idea Long list pending either a) a correction into the mid $50s, b) de-risking near term numbers (both the May and Aug quarters -- 1Q/2Q), or the TAIL research call becomes incrementally more positive such that I can look through the near term employee risk.
Bullish for Adidas.
