Nike earnings snapshot: Supply issues can hurt sales, but long-term value is intact

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  • Publication of results for the second quarter of fiscal 2022 on Monday, December 20, after the close
  • Expected revenue: $ 11.25 billion
  • BPA expectation: $ 0.6308

When the world’s largest sportswear company, Nike (NYSE :), releases its latest earnings later today, investors will likely be told a now-familiar story: Sales are affected by the disruption in the retail chain. global supply, exacerbated by COVID-19 outbreaks in Asia.

In late September, the maker of the Air Jordan and Air Force 1 sneakers told investors that plant closures in Vietnam, longer transit times and labor shortages were slowing sales, even as consumers are willing to spend more on sportswear after last year’s closings and gyms. .

During its fiscal second quarter, Nike posted flat or below single digits sales. Analysts were expecting revenue growth of 12% for the year, as well as a 12% increase for the second quarter.

But despite this very unpredictable environment for companies selling consumer goods, Nike remains the preferred choice for analysts. Given the growing consumer demand and the company’s success in e-commerce, it is expected that there will be more NKE benefits to come.

NKE consensus estimates

Chart: Investing.com

Indeed, among 36 analysts interrogates By Investing.com, the stock received an “Outperformance” rating with a target of an average increase of 10.50% on the share price over the next 12 months. Nike stock closed at $ 161.36 on Friday.

To give a perspective, during this period that ended on August 31, Nike produced its second-highest three-month revenue, while earnings per share set a record for the based company. Beaverton, Oregon.

Develop online sales

Another reason Nike is a long-term buy: The global health crisis has accelerated the company’s shift to online retailing. He created a direct-to-consumer business that is not only efficient but also responsible for improving the profit margins of the business.

For several quarters, Nike’s online sales have jumped by more than 80%, exceeding the company’s revenue target in this segment. It now represents 30% of total sales. Swiss credit in a note to customers on Friday, said he saw a rise in Nike shares after the company lowered its sales forecast. His note added:

“Controls at our US retailers have been strong throughout the holiday (despite some signs of inventory shortages) and we believe inventory reallocated to direct-to-consumer (DTC) will increase Street N. America’s revenue estimates. during the second trimester. “

According to Goldman Sachs, the short-term uncertainty about growth should not deter investors with a long-term investment horizon, as the company’s shares always recover after underperforming the market. The investment bank in a recent memo said:

“We believe there could still be a rise in inventory as Nike will likely benefit from more wellness-focused customers, likely increased casualization of fashion trends after the pandemic. ,… Leveraging its rich customer data and suite of applications to drive global uptake and demand.

Goldman Sachs added:

“We view the strength of the Nike brand as its number one competitive advantage. While fashion cycles can impact market share in the short term, we note that brand strength will support Nike’s market share gains in the longer term.

NKE stock is up 14% this year, after jumping 39% the year before. The index, during this period, gained 23%.

Final result

Nike shares could face short-term selling pressure as the company continues to face supply issues as the pandemic rages on. This weakness should be viewed as a buying opportunity by investors, given the strength of Nike’s brands and its continued drive to expand its low-cost online sales.


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