Apparel

Nike shares rise as retailer is seen taking market share from Adidas, Foot Locker

Key Points
  • Susquehanna Financial Group raises its price target for Nike shares to $93 from $78.
  • Nike's strategy to trim excess inventory and focus on selling directly to consumers is showing signs of progress, analyst Sam Poser says.
Nike president and CEO Mark Parker.
Jewel Samad | AFP | Getty Images

Nike shares climbed Monday after an analyst said the sneaker maker is gaining market share from competitors like Adidas and specialty retailers including Foot Locker and Finish Line.

Nike's strategy to trim excess inventory and focus on selling directly to consumers is showing signs of progress, Susquehanna Financial Group analyst Sam Poser said in a note to clients. The retailer is learning how to "balance scale and scarcity well," as Adidas' share of the athletic footwear and apparel market is "rapidly decelerating."

Shares of Nike climbed 2.5 percent in early trading after the research note was published. At one point, it reached an all-time intraday high of $81.97 a share.

Looking for ways to grow beyond its wholesale business, Nike has been investing in bulking up its own e-commerce platform while it tests a separate marketplace on Amazon. Its new shoes, like the Air Max 270 for running, have been selling out after launches at some stores. And the company has vowed to make a bigger push with women's athleisure, where rivals like Lululemon and Gap Inc.'s Athleta already have market bases, but retail analysts say there's plenty room to grow.

Earlier this year, Nike said it was starting to see a "return to growth in North America" — an area that has been plagued by bankruptcies of major sporting goods retailers like Sports Authority in recent years. The company has since said it expects total sales to increase by a high, single-digit percentage rate in fiscal 2019.

"We contend that the clean inventories in the marketplace, the growing [direct-to-consumer] business, and new innovative product will drive more full price selling than [Nike's] guidance infers, primarily driven by the improvement in the North American market," Susquehanna's Poser said.

For now, Nike appears to have dodged any fallout from shoppers after receiving complaints from employees about its corporate culture. Some top leaders have left the company amid allegations of Nike "fostering a hostile workplace environment." After reviewing its compensation practices, Nike then said it would give about 7,000 employees raises and change how it awards bonuses to global staff in an attempt to address concerns about pay equity.

Susquehanna raised its price target for Nike shares to $93 from $78. The stock was trading around $81.81 Monday morning, having rallied about 30 percent this year. Nike has a market cap of about $131 billion.