Many investors are expecting a booming growth in their investment as the year 2017 ushers in. Despite the fact that in the year 2016, the returns were low, many expected the year to end in a boom as they wanted to inject more money into the sector. The market has not been stable for sometimes and as a result anxiety in the market is an issue. Politics has also influenced the market trend. Donald Trump’s election as the president-elect of the United States for saw unexpected ignition on the country’s economy in an unexpected way. His election saw the US a dull growth and slumbering bond yield in the market. Donald Trump’s administration saw an increase on import tariffs thus affecting the market value of commodities. Financial Times article reports some companies that have been hit by this move that I analyse.
Overall Stock Movement in the Past 12 Months
In this analysis, let take a close look at the footwear industry. The major companies in that supply footwear are Nike and Adidas. For many years, Nike has been the market leader commanding a significant share of the market. Its supply has been the favourite for both home use and international events such as Olympics. It is in the recent times where Adidas has seen gripping the market especially on a supply of tournament kits and footwear thus leading to a stiff competition against its rival Nike. Investors have been hoping for the right in the company, but still, the moves are not favourable for Nike to grow at the expected rate. The fall in the preference of footwear product of Nike has seen the unexpected drop in it price share over the recent days. The slinking in the market can be attributed to stiff competition and change of preference among the consumers. The current state continues to worry the investor as to what will be the fate of their investment in the Nike Company that they have trusted over time.
Factors that Affected the Value of the Footwear Index
The down movement of the footwear value index can be linked to some facts. These factors range from technical to economic. First, Nike Company failed to meet the investor’s revenue and profit prediction. The company forecast on quarterly revenue failed to meet investor’s expectation that was too high underrating rivals stiff competition. It is clear to me that the expected profit is far much below what the investors intend that the company should secure due to the shrinking market share. The company has struggled to fend off the main competitor, Adidas, in its home market in North America. The company is therefore not able to maximize it the home advantage that the investors had seen. Adidas, the main competitor of Nike, implemented a diverse global portfolio that saw its profitability rapidly increase at the while Nikes stagnate.
In my opinion, the second factor that has seen Nike trail in its struggle for its footwear value index is the transitional presidency in the United States. The president-elect Donald Trump proposed protectionist policies that affected imports into the country. A fourthly five percent tariffs on import and thirty-five percent on US business that operates outside America thus sending jobs out and then trying to sell their products locally, significantly affected the company. It is in this view that I consider the presidential transition from Barrack Obama to Donald Trump as a unique factor that affected the footwear index value for the Nike products.
I also consider the success of Adidas as factor for the downward pull of Nike products index value. The success of Adidas has continually pushed Nike into a bitter corner. The increase in the market share of Adidas has frequently incited other companies in the footwear industry to diverse their product eating into the market portion of Nike. Ever company aspires to increase market share at a disadvantage of Nike (Hershman, Brett). Companies like Under Armour are experiencing a rapid market share growth. The new competitors are gaining favour due to the technological approach they are using innovatively making their products preference increase at the disadvantage of Nike. It is in this light that I consider revenue and profitability of Nike will largely depend on its ability to meet its investor’s expectation. Without meeting its investor’s expectation, the giant face a threat of continually losing its command in the industry.
Financial Times’ Opinion
According to the article Financial Times, many factors have contributed to the continuous drop of the footwear index value. The report comes up with three main reasons for such a downward move that has affected the market leaders in the industry. The stock value is recognized as to be shrinking continuously due to three main factors.
First, there is identified zigzag partner of stock value there is continues changing in the stock value of the two companies. The inconsistency of the closing stock value that Nike is recording has been rising and falling whereas the primary competitor, Adidas is also experiencing the same condition (Dye, Jessica, 2017). Secondly, the Financial Times article records that the company has not been able to meet the investor’s expectation and projections on revenue and profit. Nike has been significantly affected by the depression economic effect making the situation difficult for the company to deliver as expected. The failure in the past two-quarters reflects the inability of the business to operate within the investors’ demands and expectation.
The overall consumer test and preferences of the products have changed in the market. Coupled with innovations and creativity, competitors have managed to manoeuvres into Nike’s market making it quite difficult to expand the market but rather continue to shrink (Shotter, James, 2017). The article concludes that the current market trends are not favourable in the footwear industry. It is, therefore, predictable that the company will continue to lose. Nike has the power to take control before the situation becomes worse compared to her competitors. It is in this light that the article concludes that unless changes are done, current trends will force investors to continue to lose more.
Dow Jones in The Next 6 Months
Based on the behaviours of Dow Jones index in the last twelve months, we can predict that the industry is likely to boom in the near future. Dow Jones expects an influx in the fossil fuel industry and the energy sector at large. Based on this expectation it is, therefore, easy to speculate the same effect in the footwear industry. Despite the positive speculation, the Adidas has laid down very solid strategies aiming to outdo the industry giant, Nike.
In conclusion, the future of Nike depends on how it will respond to the stiff competition. Adidas and Under Armour who have concrete evidence of the desire to grasp the market where Nike dominates is a treat. Re-strategizing will make the company vibrant and commander ones again.
Shotter, James. “New Adidas Chief Raises Group’s Sales and Earnings Targets.” Financial Times. Nikkei Company, 08 Mar. 2017. Web. 22 Mar. 2017.
Hershman, Brett. “Nike Stock Falls off a Cliff after Hours despite Solid Growth.” The Street. The Street, 27 Sept. 2016. Web. 22 Mar. 2017.
Dye, Jessica. “Nike Revenue Falls Short of Estimates as Rivals Eye Its Turf.” Financial Times. Nikkei Company, 21 Mar. 2017. Web. 22 Mar. 2017.
Reuters, CNBC With. “Greater US Growth Afoot, Says New Adidas CEO.” CNBC. CNBC, 08 Mar. 2017. Web. 22 Mar. 2017. <http://www.cnbc.com/2017/03/08/new-adidas-ceo-targets-faster-sales-profit-growth.html>.
Associated Press. “For Americans, Trump’s Tariffs on Imports Could Be Costly.” Fox News. FOX News Network, 01 Dec. 2016. Web. 22 Mar. 2017. <http://www.foxnews.com/politics/2016/12/01/for-americans-trumps-tariffs-on-imports-could-be-costly.html>.