It is World Cup time, as the month-long soccer tournament kicks off June 11 throughout North America and lasts until July 19.
Perhaps no U.S. brand is tied to the "beautiful game" more than Nike (NKE +3.74%). While Nike is not an official sponsor of the FIFA World Cup, many of the sport's leading players, like Cristiano Ronaldo and Kylian Mbappé, have endorsement deals with Nike. Also, Nike provides the shoes and "kits" for 12 teams, including France, England, Brazil, the United States, Canada, and the Netherlands.
So, Nike will have a ton of visibility over the next month, not just from the players on the field, but on the airwaves and in social media through an advertising campaign it is launching for the World Cup.
Image source: Getty Images.
Rip the Script
Rip the Script is Nike's new World Cup ad campaign, highlighted by a star-studded 6-minute film. It's designed to introduce the universe of Nike football -- the game, the players, the culture, and, of course, Nike shoes and apparel.
"We are also utilizing the World Cup as an opportunity to catalyze the football marketplace for quarters to come," CEO Elliott Hill said on the fiscal Q3 earnings call. "By the end of the tournament, we will have elevated our presentation in more than 5,000 football doors around the world, with wholesale partners and Nike Direct."
One of the major changes that Hill has ushered in since becoming CEO is renewing the focus on wholesale channels, like Dick's Sporting Goods, Foot Locker, Shoe Palace, and Academy Sports. Wholesale sales were up 5% in the last quarter, while direct sales were down 5% and overall sales were flat.
Hill said he expects to deepen the relationship with these wholesalers through the World Cup.
Is Nike stock a buy?
While Nike has some wholesale sales momentum, it is saddled with declining earnings. In the latest quarter, the third quarter of fiscal year 2026, which ended Feb. 28, expenses rose 2%, and cost of sales jumped 2% due in large part to tariffs. The higher tariffs have contributed to the 3% decline in gross profits and a 130-basis-point drop in gross margin to 40.2%. As a result, net income plummeted 35%.
CFO Matthew Friend said on the call that tariffs will be a headwind until Q2 of fiscal 2027, when mitigation efforts kick in. But the outlook is for a low-single-digit revenue decline through calendar year 2026, and continued margin pressure. By Q2 2027, the December quarter, Friend said the company anticipates margin expansion and the beginning of an earnings recovery.
NYSE: NKE
Key Data Points
So is Nike a buy now, given the World Cup's visibility around the corner? The tournament may not have much immediate impact on sales, but the visibility could give the stock a lift, as could a solid Nike Q4 earnings release on June 30.
With shares down 31% year to date, the stock is trading at 22 times earnings, down considerably from earlier levels.
I think Nike stock may actually be nearing the buy zone.
Here's why: Investors have already baked in depressed near-term sales and margins, so a decent earnings report, an expected earnings recovery in fiscal 2027, the visibility of the World Cup, and a reasonable valuation might just make Nike a buy heading into the World Cup.
