CNBC’s Jim Cramer on Thursday gave investors his stamp of approval to buy some shares of Nike, but he warned that such an investment is tricky.
“You’ve got my blessing to put on a small position — only small — because if Nike really can turn itself around, the stock will take off long before the financials do,” he said. “You need to get ahead of that, but it’s a risky call, so I suggest building your position gradually over time.”
Nike reported an earnings beat in its most recent quarter. However, it failed to meet revenue estimates and withdrew its full-year guidance. The sneaker retailer just hired a new CEO — company veteran Elliott Hill came out of retirement to replace John Donahoe as CEO this week. The company’s stock was hit in response to the quarter, and shares are currently down 22.81% year-to-date.
Cramer said Nike’s management change could improve business, even though it may take a while. He said Hill is more suited to the role than Donahue, who had previously worked in the tech world, namely as CEO of ServiceNow. To Cramer, Donahue focused too much on Nike’s direct-to-consumer and digital business. The company needs to fix the relationships with distributor partners, Cramer said, as it had neglected them and created space for competitors to gain market share — and challengers like On and Hoka are getting stronger.
Nike is also somewhat hostage to the consumer environment in the U.S. and abroad Cramer said. But he said the global landscape is looking more positive as central banks cut interest rates and the Chinese government initiates stimulus plans. And while he admitted he’d like more definitive proof of a Nike turnaround, Cramer noted that by the time that happens, it may be too late to get in to the stock. If “just a couple of things go right,” Nike could roar, he said.
“The Donahoe era did real damage to Nike. The quality of the company’s products, once unassailable, is now perceived to be notably weaker,” Cramer said. “I believe the new management team led by Elliott Hill can fix this—they’re shoe guys—but I’d like to see at least a little evidence before declaring that the turnaround is at hand.”
Nike did not immediately respond to a request for comment.
