Why Nike Stock Soared Today

Actions of NIKE (NKE 5.20%) they moved higher today after the sportswear company appeared to benefit from a cooler-than-expected Producer Price Index (PPI) report showing inflation fell faster than expected. The stock was also helped after Starbucks flew at the news that it was replacing its CEO, as many on social media said they wished Nike would make a similar move.

Shares of Nike were up 5.3% as of 2:00 PM ET Tuesday.

Image source: Getty Images.

Nike investors want their own Brian Niccol?

First, the better-than-expected PPI reading lifted the stock market, lifting consumer-facing stocks such as Nike that have struggled with inflation. Lower inflation is good for consumers and is likely to lead to lower interest rates, which tends to boost stock prices.

Wholesale prices rose just 0.1 percent from June to July and rose 2.2 percent year-over-year, essentially matching the Fed’s 2 percent inflation target. Wholesale prices tend to be a leading indicator of consumer-level costs, so that 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 Starbucks investors were happy to see Laxman Narasimhan ousted after 17 months and confident in Niccol, a seasoned restaurant boss who turned Chipotle around after the E. coli crisis.

Investors seem to think Nike could benefit from a similar turnaround, as critics say management under CEO John Donahoe has strayed from the company’s strengths and is focusing too much on the direct-to-consumer channel.

Will Nike have a new CEO?

There’s no indication that a top executive shakeup might be coming at Nike, but there rarely is with CEO firings.

Shares are now down 56% from their pandemic-era peak, and the company has steadily lost market share to upstart rivals such as On Holding and Deckers HOKA brand.

Nike also expects sales to decline in the current fiscal year. There is no doubt that the brand is in trouble and needs some kind of change. A new CEO is certainly not out of the question.