Analysts are preparing for disappointing results for Nike (NKE) reported first quarter earnings Thursday afternoon. The Dow Jones athletic apparel giant faces significant hurdles in China, supply-chain issues and a strengthening US dollar. Nike stock is down nearly 35% so far in 2022 and continued to fall on Monday to a new two-year low.
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In its Q4 results from June, Nike said it expects fiscal 2023 revenue to grow in the low double digits. Although it expects real-dollar earnings for Q1 to be flat to slightly higher, slightly below analyst targets.
For fiscal Q4, Nike reported that China revenue fell 19% from a year earlier to $1.6 billion as pandemic lockdowns forced store and factory closures. Meanwhile, the dollar continues to climb, with the greenback rising to start the current Q2.
Deutsche Bank analyst Gabriella Carbone lowered the company’s price target on Nike stock to 123 from 130 but maintained a buy rating. Carbonet said he expected Nike’s earnings to miss the Q1 consensus, driven by soft results in China, currency headwinds and a larger-than-expected margin contraction. He now models revenue for China of $1.581 billion, while Wall Street estimates $1.66 billion.
Jefferies analyst Randal Konik lowered his price target on NKE stock to 130 from 155, citing declining web traffic, a decline in Chinese apparel and footwear sales in August, and a strengthening U.S. dollars. Konik projects FY2023 earnings of $3.40 per share, below the FactSet consensus of $3.64. And Jefferies sees full-year sales of $49.3 billion, compared with general estimates of $49.8 billion. Konik maintained a long-term buy rating based on the company’s “track record of innovation and maintaining cultural relevance.”
Today’s lowered Deutsche Bank and Jefferies targets are still above NKE’s current stock price.
Nike Revenues
Expectations: For the first quarter ended in August, analysts see Nike’s earnings falling 21% to 92 cents per share. Revenue is seen climbing slightly to $12.28 billion, from $12.25 billion last summer.
On September 21, Nike announced that former Intel CEO Bob Swan will join the board of directors as the Dow athletic apparel giant expands its digital sales and offerings. Swan is currently an operating partner in Andreessen Horowitz’s (a16z) growth investing team. Before leading Intel (INTC), Swan served as CFO of eBay (EBAY) and helped lead the spinoff of PayPal (PYPL) in 2015.
Nike CEO John Donahoe, who previously ran the software giant Service Today (NOW), is the chairman of PayPal.
For fiscal 2022, Nike Digital sales rose 18% to $10.7 billion, from $9.1 billion in 2021. Nike Direct, its direct-to-consumer segment, accounted for 42% of total sales in fiscal 2022.
NKE Stock Analysis
NKE stock fell 0.9% to 96.13 on Monday, on track for the lowest close in more than two years. It has been among the Dow Jones Industrial Average’s worst performers this year, falling about 35% since January.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
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