Nike's Strategic Shift: Unraveling The Decline In Short-Term Investments

Nike's stock price has historically slumped in relation to large sporting events sponsored by the company, such as the 2008 Summer Olympics, the 2010 Men’s World Cup, the 2012 Summer Olympics, and the 2014 Winter Olympics. This is because analysts and investors are surprised by the amount of money Nike spends on marketing these events, and pull back from the stock.

Large sporting events sponsored by Nike do not raise stock price in the short term

Large sporting events sponsored by Nike do not historically have the immediate effect of raising Nike’s stock price in the short term. The Nike stock price slumped in relation to the 2008 Summer Olympics, 2010 Men’s World Cup, 2012 Summer Olympics, and 2014 Winter Olympics. Analysts and investors are gobsmacked by the revelation of just how much money Nike spends marketing these events and pull back from the stock.

Nike's cash outflows were $1.7 billion on dividends and $608 million on the repurchase of common stock, so buybacks were a less significant contributor to falling retained earnings. Other comprehensive income fell, from a deficit of $56 million in fiscal 2020 to a loss of $380 million in 2021.

The managerial competence at Nike hasn’t relied on financial engineering but rather the wealth created for Nike shareholders is the result of good old-fashioned growth. Someone back in 2000 was probably looking at Nike’s 19% annual returns from its 1980 IPO through the then-present 2000 and concluded that the epic growth at Nike had long past and the stock wasn’t worth holding for the long haul. And then Nike went on to compound at a rate of 17% from 2000 through the present day, which is impressive considering that the P/E ratio at Nike back then was well into the 20s.

The Nike stock price slumped in relation to the 2008 Summer Olympics, 2010 Men’s World Cup, 2012 Summer Olympics, and 2014 Winter Olympics. Analysts and investors are gobsmacked by the revelation of just how much money Nike spends marketing these events and pull back from the stock.

The Nike stock price slumped in relation to the 2008 Summer Olympics, 2010 Men’s World Cup, 2012 Summer Olympics, and 2014 Winter Olympics. Analysts and investors are gobsmacked by the revelation of just how much money Nike spends marketing these events and pull back from the stock.

Analysts and investors pull back from the stock due to high marketing spend

Nike's cash outflows were $1.7 billion on dividends and $608 million on the repurchase of common stock, so buybacks were a less significant contributor to falling retained earnings. Other comprehensive income fell, from a deficit of $56 million in fiscal 2020 to a loss of $380 million in 2021.

Debt capital typically includes all short- and long-term debt, such as bonds, term loans, and unsecured notes, though a wider set of liabilities is occasionally used by some investors. Debt financing is generally senior to equity financing in the event of liquidation, though it is often acquired at a lower cost by firms with sufficient creditworthiness.

The managerial competence at Nike hasn’t relied on financial engineering but rather the wealth created for Nike shareholders is the result of good old-fashioned growth. Someone back in 2000 was probably looking at Nike’s 19% annual returns from its 1980 IPO through the then-present 2000 and concluded that the epic growth at Nike had long past and the stock wasn’t worth holding for the long haul. And then Nike went on to compound at a rate of 17% from 2000 through the present day, which is impressive considering that the P/E ratio at Nike back then was well into the 20s.

Most of the companies I cover on this site are defensive stocks not just because they perform well during recessions, but also because they are warding off attackers and trying to maintain their moats. Many of them have ten-year earnings growth rates in the single digits. Nike stock is an exception. It is one of the few companies I cover that offers both the defensive attributes of high earnings quality while also the offensive attribute of high earnings per share growth.

Nike stock slumped in relation to 2008 Summer Olympics, 2010 Men’s World Cup, 2012 Summer Olympics, and 2014 Winter Olympics

The Nike stock price slumped in relation to the 2008 Summer Olympics, 2010 Men’s World Cup, 2012 Summer Olympics, and 2014 Winter Olympics. Seth Archer, a writer, succeeds in making a counterintuitive point that large sporting events sponsored by Nike do not historically have the immediate effect of raising Nike’s stock price in the short term. Archer’s theory is that analysts and investors are gobsmacked by the revelation of just how much money Nike spends marketing these events and pull back from the stock.

Nike's cash outflows were $1.7 billion on dividends and $608 million on the repurchase of common stock, so buybacks were a less significant contributor to falling retained earnings. Other comprehensive income fell, from a deficit of $56 million in fiscal 2020 to a loss of $380 million in 2021.

The managerial competence at Nike hasn’t relied on financial engineering but rather the wealth created for Nike shareholders is the result of good old-fashioned growth. Someone back in 2000 was probably looking at Nike’s 19% annual returns from its 1980 IPO through the then-present 2000 and concluded that the epic growth at Nike had long past and the stock wasn’t worth holding for the long haul. And then Nike went on to compound at a rate of 17% from 2000 through the present day, which is impressive considering that the P/E ratio at Nike back then was well into the 20s.

The Nike stock price slumped in relation to the 2008 Summer Olympics, 2010 Men’s World Cup, 2012 Summer Olympics, and 2014 Winter Olympics. Archer’s theory is that analysts and investors are gobsmacked by the revelation of just how much money Nike spends marketing these events and pull back from the stock.

The Nike stock price slumped in relation to the 2008 Summer Olympics, 2010 Men’s World Cup, 2012 Summer Olympics, and 2014 Winter Olympics. Archer’s theory is that analysts and investors are gobsmacked by the revelation of just how much money Nike spends marketing these events and pull back from the stock.

Nike's cash outflows were $1.7 billion on dividends and $608 million on the repurchase of common stock

The repurchase of common stock is a strategic move that can have several effects on a company's financial health and stock performance. When a company buys back its own stock, it reduces the number of shares outstanding, which can increase the value of each remaining share and potentially boost the stock price. This is because the demand for the stock increases as the supply decreases. Additionally, buying back stock can be a way for a company to return excess cash to shareholders and show confidence in its future prospects.

However, the high cash outflows on dividends and the repurchase of common stock can also have implications for a company's short-term investments. Nike's ability to invest in short-term opportunities may be impacted by the significant cash outflows. The company might need to reassess its investment strategies and allocate funds more carefully to balance its financial obligations and investment goals.

Furthermore, the repurchase of common stock can also affect a company's capital structure and retained earnings. By reducing the number of shares outstanding, the repurchase can increase the earnings per share, which may improve the company's overall financial performance. However, it's important to note that the repurchase of stock can also lead to a decrease in the company's retained earnings, as the cash outlay reduces the amount of earnings that can be reinvested in the business.

In summary, Nike's cash outflows on dividends and the repurchase of common stock are significant financial moves that can impact the company's short-term investments and overall financial health. The company's strategic decisions regarding dividends and stock repurchases can have both positive and negative effects on its financial performance and investment capabilities.

Buybacks were a less significant contributor to falling retained earnings

Nike's retained earnings fell because of cash outflows of $1.7 billion on dividends and $608 million on the repurchase of common stock. Buybacks were a less significant contributor to falling retained earnings in 2021.

Nike's retained earnings fell because of cash outflows of $1.7 billion on dividends and $608 million on the repurchase of common stock. Buybacks were a less significant contributor to falling retained earnings in 2021.

Nike's retained earnings fell because of cash outflows of $1.7 billion on dividends and $608 million on the repurchase of common stock. Buybacks were a less significant contributor to falling retained earnings in 2021.

Nike's retained earnings fell because of cash outflows of $1.7 billion on dividends and $608 million on the repurchase of common stock. Buybacks were a less significant contributor to falling retained earnings in 2021.

Nike's retained earnings fell because of cash outflows of $1.7 billion on dividends and $608 million on the repurchase of common stock. Buybacks were a less significant contributor to falling retained earnings in 2021.

Nike's retained earnings fell because of cash outflows of $1.7 billion on dividends and $608 million on the repurchase of common stock. Buybacks were a less significant contributor to falling retained earnings in 2021.

Frequently asked questions