Hot Picks: Retail stocks Nike, Gildan and VF seen rebounding
BNN Bloomberg
Retail stocks including Nike, Gildan and VF could rebound as turnaround strategies, acquisitions and debt reduction reshape the sector outlook.
BNN Bloomberg spoke with David Swartz, senior equity analyst, consumer equity research at Morningstar, about retail opportunities involving Nike, Gildan and VF as companies pursue brand resets, acquisitions and balance-sheet improvements.
Read the full transcript below:
ANDREW: Time for Hot Picks. Let’s zero in on three ideas in retail. Our guest has Nike as his top selection. He believes the company can stage a turnaround using its strong connections to global sports teams, athletes and events. Let’s get more from David Swartz, senior equity analyst, consumer equity research at Morningstar. David, great to see you and thanks very much. Why do you think Nike offers an opportunity for investors?
DAVID: Nike has had a really tough time the last couple of years and the company is in the midst of a turnaround, but I think the stock is quite undervalued. My fair value estimate is $102, which is obviously well above where it is right now. The stock has really been weak, even lately it has had a big downturn, and that is because people do not have clarity on when a turnaround might happen. But I do think Nike is making progress. The company is working on improving its relationships with retailers like Dick’s Sporting Goods and Foot Locker, and working on its own direct-to-consumer channels as well.
Nike has struggled in China and that is another major concern. I think it is possible we will see a major restructuring in China at some point that could be a positive catalyst for the stock. It is also possible that Nike will sell Converse, which is a very small part of the business, but it has been a real drag on earnings because it has been struggling badly. Nike recently announced significant layoffs at Converse, which suggests it is no longer really supporting the brand.
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