If China’s economic stingers Brian Niccol and Elliott Hill take over Starbucks and Nike, respectively, they’re doing so in a key market that once put pressure on their predecessors Also got a boost. Both companies are among the top 50 S&P 500 companies with direct sales exposure to China – Nike’s exposure is 14.7%, while Starbucks’ exposure is 8.6%, according to Bank of America data. As China’s economic stimulus measures take shape, that could ultimately help these global brands. “A fundamental shift may require additional support – particularly on the fiscal front – to stabilize the housing market and revive consumption. But the coordinated effort and rapid follow-up to date suggest it could also be a real deal for the wider economy , depends on the continuity and implementation of policies,” UBS analyst Hartmut Issel and others said in a report on October 1. The same report lists Starbucks as one of the U.S. stocks that could benefit from the rebound. SBUX 3M mountain Starbucks shares have risen since the company announced a CEO change. Nike and Starbucks in China Although the specific plans of Niccol and Hill are unclear, the Chinese market seems to be a focus area. At Starbucks, the company’s leadership team in China has been shaken up since Nicole took over in September. Some Wall Street analysts have speculated that a larger restructuring, such as a joint venture with a Chinese company, could be in the works to help reshape business in that market. At Nike, senior executives still appear to view China as a growth opportunity. “While we have lowered our near-term expectations for the remainder of the year in China, sports is a growth industry in China. Sports participation is rising and we believe we are optimistic about the long-term possibilities,” said Matthew Furman, chief financial officer of Nike. Hill, who officially took over on October 14, did not speak during the company’s earnings call on Tuesday, Matthew Friend, who did not speak on the call, said. Still, without better execution, Chinese consumers will rebound. It won’t necessarily boost sales for Starbucks and Nike, which have struggled in recent years with growing competition from local players and growing suspicion of foreign brands from the Chinese government and consumers, said Bank of America analyst Chen Luozai. The October report said: “Given consumers’ increasing focus on the functional and emotional value of products, ‘disappointment’ with global brands, and the increasing competitiveness of domestic brands, global brands will not benefit equally or disproportionately from China’s recovery. Reasons for skepticism Chipotle and Nike’s stock prices rose after the companies announced leadership changes, but further winning over investors may take time, even as China gains momentum Some investors told CNBC they are taking a patient approach in their assessment. Executive changes and the impact of stimulus measures. Ellen Hazen, chief market strategist at FL Putnam, said when asked: “Certainly, it is better than no stimulus measures. But I think China’s stimulus measures so far are ultimately. How much benefit it will bring to consumers is unclear. “I don’t know that this will make a huge difference, especially overnight,” Hassen added. Eric Clark, co-portfolio manager of Rational Dynamic Brands Fund, said Nike’s CEO change is a “clear morale booster” for the company, but there is no clear path to becoming a high-growth brand again. He said his fund has been in and out of Nike stock this year but does not currently own the stock. “If I could buy Nike for $75 or less, I probably would … but I don’t think it’s going to be in the growth basket anymore,” Clark said. “The only catalyst is a new CEO reviving innovation, which kind of proves my story. And China doesn’t seem to be changing anytime soon,” he added. Both stocks have significantly underperformed the broader market so far this year, and Wall Street is divided. Investors’ wait-and-see attitude applies not just to these companies but to China itself. The stimulus policies announced so far have mainly focused on the real estate industry, and it is unclear whether the final package will provide a sustained boost to Chinese consumers. “Given the massive wealth destruction and real estate turbulence that has occurred before, policy must be decisive. We believe that a lot of work needs to be done to repair confidence/expectations, especially amid repeated internal policy changes and frequent external geopolitical shocks,” Bank of America Luo said. —CNBC’s Michael Bloom contributed reporting.
How China’s stimulus package could power Nike and Starbucks’ new CEOs | Real Time Headlines
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