The stock market climbed on Monday, with major indexes waffling between positive and negative territory. When all was said and done, the S&P 500 (SNPINDEX:^GSPC) and Dow Jones Industrial Average (DJINDICES:^DJI) both eked out small gains.
Today's stock market
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Energy stocks endured a tough session, with the Energy Select Sector SPDR ETF (NYSEMKT:XLE) falling 0.55%. But consumer goods stocks helped prop up the broader market, with the Consumer Staples Select Sector SPDR ETF (NYSEMKT:XLP) rising 0.4%.
As for individual stocks, shares of athletic footwear giant Nike (NYSE:NKE) fell following cautious words on Wall Street, while nutrition supplement specialist Herbalife (NYSE:HLF) popped on news of an ambitious stock repurchase plan.
Herbalife's unusual repurchase plan
Herbalife stock climbed 10% today after it announced the commencement of a "modified Dutch auction" to buy up to $600 million in common shares in the range of $60 to $68 -- an enormous sum representing more than 18% of the company's float and just under 10% of total shares outstanding. This will be incremental to Herbalife's existing $1.5 billion share repurchase plan, under which it has already bought back roughly $299 million in shares year to date.
Herbalife also confirmed that it was in discussions with a "prospective financial investor" that involved the possibility of the company being taken private. Those discussions were terminated last week on Aug. 16. To sweeten the deal for prospective tendering shareholders, each share tendered will also come with a contractual contingent value right (CVR) allowing shareholders to receive a contingent cash payment if Herbalife is taken private within two years.
Finally, Herbalife struck an agreement with its largest shareholder, Carl Icahn, as well as his relevant affiliates, through which he agreed not to participate in the tender offer or to increase his stake in the company above 50% for the two years following the tender offer -- that is, unless Icahn opts to acquire 100% of the company.
In the end, this is a massive vote of confidence any way you measure it. And so it's no surprise to see Herbalife shares climbing higher today.
Nike's competitive woes
Shares of Nike fell 2.4% today, extending a 4.4% decline Friday following disappointing results from footwear retailer Foot Locker (NYSE: FL). Today's drop, however, came courtesy of Jefferies Group analyst Randal Konik, who downgraded shares of Nike from buy to hold and reduced his price target from $75 to $60.
To justify his tempered enthusiasm, according to CNBC, Konik pointed to market researcher NPD's web traffic data indicating that Nike lost 1.2 percentage points of market share over the past year ending in May, while competitor Adidas managed to simultaneously gain 5 points. He further suggested that market share gains and margin expansion will be "elusive."
This brings Nike stock back down to where it stood prior to its latest quarterly report in late June, when shares popped after Nike's outlook called for currency-neutral revenue growth in the mid- to high-single-digit percent range this fiscal year. Nike also guided for adjusted gross margin this year to expand beyond the upper end of its longer-term goal of 30 to 50 basis points.
Investors will need to wait until Nike's fiscal first-quarter report in late September to receive more color on whether Wall Street's concerns have merit. But with so much doubt surrounding the effects of competition and the relative underperformance of footwear retailers lately, it's hard to blame Nike investors for taking some of their recent profits off the table.