Wealthy Financier Bill Ackman Persists in Acquiring This Share, Suffering a 50%+ Decrease. Contemplating Purchase Before a Potential Rebound?
Wall Street bigwigs, including the head honchos at colossal investment firms, are legally obligated to disclose their stock transactions quarterly. Not too long ago, billionaire Bill Ackman's firm, Pershing Square, reported its fourth-quarter 2024 trades. Among the moves was an ongoing accumulation of shares in the legendary athletic apparel giant, Nike (NKE -0.95%). After a tumultuous year that saw the company's value plummet by over 50%, Nike became Pershing Square's fifth-largest holding (more than 11% of their 10-stock portfolio).
Now, the whispers of Nike's renaissance are growing louder. The company recently announced a potentially groundbreaking collaboration that could set the stage for a triumphant return.
Nike's woes have their roots in missteps following the COVID-19 pandemic. The company abandoned several key partnerships with retailers to shift focus on direct-to-consumer sales. However, this move backfired, causing Nike to lose its footing alongside competitors like On and Hoka.
Leadership changes in late 2023 put former executive Elliott Hill at the helm. In the quarter ending Nov. 30, 2024, Nike recorded a decline in companywide sales of 8% and a drop in gross profit by 10%, as the company reorganized and prepared for a comeback.
On the earnings call, executive teams noted evidence of progress, such as lowering inventory prices, strengthening retail relationships, and infusing new ideas into their product lineup.
Ackman, who isn't known for his verbosity regarding Pershing Square's stake in Nike, likely appreciated the company's progress because he secretly hoarded shares from late 2017 to early 2018 – earning his fund a $100 million profit.
To change things up, Nike joined forces with SKIMS, a fast-growing shapewear and clothing label, for a joint venture. SKIMS, co-founded by Kim Kardashian in late 2019, saw exponential growth as an online-based company and expanded to $1 billion in annual sales by 2024. Now, in an impressive power move, Nike plans to open permanent storefronts to complement SKIMS's growing presence.
SKIMS has successfully appealed to broad audiences with inclusive clothing sizes and the help of Kim Kardashian's celebrity clout. The partnership could help Nike claim new territory against competitors like Lululemon.
The NikeSKIMS lineup debuts in the spring, making it difficult to judge the impact on Nike's long-term prospects immediately. However, the potential for growth is undeniably palpable.
Despite the recent dip in sales and profits, Nike boasts a strong financial backbone. The company maintains a P/S ratio of 2.3, the lowest it's been in over a decade. Meanwhile, Nike remains the world's most domineering shoe and athletic apparel titan, with a formidable cash reserve ($9.7 billion) and a market cap ($127 billion) heavily exceeding their current debt ($9 billion).
As Nike ventures into uncharted territories with partnerships like SKIMS, the long-term outlook isn't entirely clear. However, the company's enduring brand power and financial resilience make it an attractive investment opportunity for those with a bit of patience and vision.
- Pershing Square, led by Bill Ackman, has been strategically investing in Nike's shares, as evidenced by their fourth-quarter 2024 disclosures, which placed Nike as their fifth-largest holding.
- Ackman's ongoing investment in Nike could potentially yield significant returns, given the company's recent moves to reposition itself in the market, such as the partnership with SKIMS.
- With the NikeSKIMS collaboration set to debut in the spring, analysts in the finance world might be closely watching Nike's earnings to assess the impact on their long-term financial performance.
- The strong financial foundation of Nike, with a low P/S ratio and a substantial cash reserve, might make it an attractive option for investors who are willing to wait for the company's strategic partnerships to unfold and contribute to its earnings accumulation.
