- Nike reported strong second-quarter earnings Thursday and CEO Mark Parker gave credit to its Jordan Brand, which returned to healthy growth in North America.
- The Jordan Brand's growth highlights how Nike has "successfully recalibrated its inventory positioning," Jefferies said.
- The firm sees Foot Locker as a prime beneficiary of Nike's resurgence in North American, given that the brand represents around 70% of Foot Locker's product lines.
- Watch Foot Locker and Nike trade live.
Nike's Jordan Brand is coming back and Foot Locker is the way to play it, Jefferies says.
The sneaker giant on Thursday reported strong second-quarter results, and on the earnings call following the release, Nike CEO Mark Parker gave credit to the Jordan Brand, which saw double-digit growth in North America.
"I think the great story in Jordan is that we're managing the business more holistically between performance, product and retro," Parker said, highlighting momentum from the new Air Jordan 33, the $120 price-point Jordan Max Aura, and iconic Air Jordan 1.
Jordan's growth is evidence that Nike has "successfully recalibrated its inventory positioning, an effort that began in mid-FY'18," a group of Jefferies analysts led by Randal Konik said in a note out on Friday. Last year, Nike nearly lost its crown as king of the sneaker market because it overproduced its high-end shoes, making its popular Jordan Brand too easy to get and not as cool.
"We find valuation expensive versus peers, and we see Foot Locker as a better way to play Nike's resurgence," said Konik.
The firm's data show that Nike's North American sales performance has a 78% correlation with Foot Locker's same-store sales. Additionally, around 70% of Foot Locker's product lines are Nike.
Foot Locker was the main driver of Nike's North American wholesale strength and "Nike's push towards 'differentiated' retail with fewer, better partners should ultimately benefit Foot Locker," said Janine Stichter at the Jefferies team.
They have a "buy" rating on Foot Locker and a $62 price target — 25% above where shares were trading. As for Nike, the team has a "hold" rating and $80 price target — 9% above where shares were trading.
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