Nike (NKE) releases its Q2 and YTD 2025 results on December 19 at which time I intend to revisit this existing holding. The purpose of this brief post, therefore, is merely to disclose that my NKE exposure increased on December 3 with the purchase of 200 shares @ $78.4769 through a 'Core' account within the FFJ Portfolio. My NKE exposure currently stands at 1133 shares.
My last NKE review was in this July 3 post at which time the Q4 and FY2024 results were the most current.
To say that NKE has fallen out of favor with many investors is an understatement. When great companies stumble, however, it often creates buying opportunities.
Well-know investor Bill Ackman (Pershing Square Capital Management) acquired 3,040,132 and 13,240,206 shares in Q2 and Q3 2024, respectively. His decision to invest in NKE, however, has no bearing on my investment decisions.
Share Repurchases
In my prior post I state that NKE's capital allocation includes the prolific repurchase of its outstanding shares. My hope was that NKE would continue to aggressively repurchase shares while they are undervalued. We will see if this is happening once the Q2 2025 results are available.
In FY2014 - FY2024, the weighted average diluted shares outstanding (in billions) was 1.812, 1.769, 1.743, 1.692, 1.659, 1,618, 1.592, 1.609, 1.611, 1.570, and 1.530. In Q1 2025, the weighted average common shares outstanding was 1.502B.
During Q1 2025, NKE repurchased a total of 14.8 million shares of its Class B Common Stock for $1.193B (an average price of $80.60/share) under the four-year, $18B share repurchase plan authorized by the Board in June 2022.
NKE continues to expect funding of share repurchases will come from operating cash flows with the timing and the amount of share repurchases being dictated by its capital needs and stock market conditions.
Final Thoughts
NKE's fair value is likely in the low $90s. If NKE's share price were to approach ~$92, this would be ~$13.52 higher than my $78.4769 purchase price for a ~17% return (excludes any return from the negligible dividend income). I am still 'underwater' with my NKE investment but I am not concerned. In the grand scheme of things, my NKE exposure is negligible. It was not a top 30 holding when I completed my 2024 Mid Year FFJ Portfolio Review and it is still not a top 30 holding.
The NKE brand remains strong. Under its prior leadership, however, NKE 'lost its way'.
On September 19, 2024, NKE's new CEO (Elliott Hill) was appointed to replace John Donahoe, who stepped down as CEO after serving in that role since January 2020; Hill began his role on October 14, 2024.
Hill is a NKE veteran who started as an intern in 1988 and held many leadership roles before retiring in 2020. He previously served as president of consumer and marketplace, and held leadership positions in Europe and North America.
His first moves as CEO included reshuffling the company's management team, starting with legal, sports marketing, and supply chain. Hill also appointed Tom Peddie, another retired NKE veteran, to lead North American operations.
I do not anticipate the Q2 and YTD2025 results will show a miraculous turnaround. Nevertheless, I expect better results from NKE over the next several quarters. If this does happen, I envision an increasing number of investors will 'warm up' to NKE at which time we can expect a share price increase. I would rather increase my NKE exposure before this does occur.
I wish you much success on your journey to financial freedom!
Note: Please send any feedback, corrections, or questions to [email protected].
Disclosure: I am long NKE.
Disclaimer: I do not know your circumstances and do not provide individualized advice or recommendations. I encourage you to make investment decisions by conducting your own research and due diligence. Consult your financial advisor about your specific situation.
