Nike (NKE) - Get NIKE, Inc. (NKE) Report was the worst performing stock on the Dow Jones Industrial Average in 2016, falling about 19%, but there are indications that the sports apparel behemoth is making a comeback even as competitors falter.
Nike shares were tripped up by Under Armour's (UA) - Get Under Armour, Inc. Class C Reportfourth quarter results on Tuesday, but the stock has slowly made its way higher over the last three months after spending most of the last 12 months in a free fall.
Year to date, the stock is up 4.15%.
A struggling retail sector, concerns about waning product demand and increased competition from Under Armour and Adidas (ADDYY) have all conflated to push Nike lower, but there is evidence that the company's business is as strong as it has every been.
Retailers Finish Line (FL) - Get Foot Locker, Inc. Report and Foot Locker (FL) - Get Foot Locker, Inc. Report were both bullish on footwear in their recent earnings calls. Finish Line reported comparable store footwear sales in the high single digits, driven by strength in running, basketball, and casual athletic shoes.
A recent Jefferies quarterly survey of nearly 200 footwear retailers indicated that footwear remains robust and that the anticipation of new signature basketball sneakers, such as Nike's Paul George 1, will help accelerate sales in the near-term.
"In our survey work, the brand first indicated by sales associates as strongest in basketball was predominantly Nike, with its proportion expanding noticeably to almost 90% since our last survey," Jefferies analyst Randal J. Konik wrote.
Running wasn't as strong for Nike, with Adidas gaining market share in the category thanks to multiple popular new releases. However, even though Adidas' mentions were up, Nike still accounted for 71% of survey respondents' best-seller picks.
Part of Nike's appeal is its revenue stream diversity. Nearly one-third of Nike's revenue comes from apparel, and the company's management has indicated that they see apparel, especially performance apparel, as a growth market.
Nike is targeting $50 billion in revenue by 2020.
Unlike Under Armour, which relies on North America for 85% of its revenue, Nike gets 53% of its revenue from outside the U.S. However, while markets in Asia remain under-penetrated, President Trump's protectionism push could be a headwind for the company.
Nike operates in 190 countries and manufactures the vast majority of its inventory overseas.
Additionally, North America and Western Europe were the only two markets that Nike reported falling futures orders, both were down 4%.
Investors will be looking for guidance on potential international headwinds when the company reports its fourth quarter results in March. In the meantime, Nike continues to show signs that 2017 will be a bounce-back year.