Shares of Nike (NYSE:NKE) rose today after the sportswear company appeared to benefit from a lower-than-expected Producer Price Index (PPI) report that showed inflation falling faster than expected. The stock also benefited from Starbucks rose sharply when it was announced that the CEO would be replaced, as many on social media expressed that they would like to see Nike make a similar move.
Nike shares rose 5.3 percent as of 2 p.m. ET on Tuesday.
Do Nike investors want their own Brian Niccol?
First, the better-than-expected PPI reading sent equity markets soaring, boosting consumer-oriented stocks like Nike, which have struggled with inflation. Falling inflation is good for consumers and is likely to lead to lower interest rates, which in turn will boost stock prices.
Wholesale prices rose just 0.1 percent from June to July and 2.2 percent year-over-year, essentially hitting the Fed’s 2 percent inflation target. Wholesale prices are typically a leading indicator of costs at the consumer level, which bodes well for companies like Nike.
And the news that Starbucks had poached CEO Brian Niccol Chipotle Mexican Grill had a big impact on both stocks, showing that Starbucks investors were happy to see Laxman Narasimhan fired after 17 months and had faith in Niccol, a veteran restaurant chef who had gotten Chipotle back on track after the E. coli crisis.
Investors apparently believe Nike could benefit from a similar shift, as critics say management under CEO John Donahoe has strayed from the company’s strengths and is too focused on direct sales.
Is Nike getting a new CEO?
There is no indication that Nike is about to undergo a change in its top leadership position, but that is rarely the case when CEOs are fired.
Shares have fallen 56% since their peak during the pandemic, and the company has steadily lost market share to emerging competitors such as When holding And Deckers’ Brand HOKA.
Nike is also expecting a drop in sales in the current financial year. There is no doubt that the brand is in trouble and needs change. A new CEO is certainly not out of the question.
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Jeremy Bowman holds positions in Chipotle Mexican Grill, Nike, and Starbucks. The Motley Fool holds positions in and recommends Chipotle Mexican Grill, Nike, and Starbucks. The Motley Fool recommends On Holding and recommends the following options: long January 2025 $47.50 calls on Nike and short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
Why Nike Stock Is Rising Today was originally published by The Motley Fool
