As Adidas Grows, Experts Can’t Agree on Whether Things Are Getting Better or Worse for Nike

NikeLab Riccardo Tisci
NikeLab Dunk Lux Chukka x RT sneakers.
Courtesy of Nike

In the face of intensifying competition from Adidas and Puma, experts can’t agree on which direction business at Nike is headed.

According to Canaccord Genuity analyst Camilo Lyon — who cites a lack of exciting product and slipping market share, among other things — the way is down.

“Nike’s stock is up 13 percent year-to-date on expectations that it will regain its footing and re-accelerate its revenue growth,” Lyon wrote in a March 17 memo. “However, we believe it will not be until spring ’18 at the earliest when we [will] see a material improvement in its assortment that can compete with Adidas’ strong offering.”

Nike will produce its third-quarter results after the markets close Tuesday. Wall Street’s average bets call for revenue growth of 5.4 percent, to $8.47 billion, and earnings per share of 53 cents.

Lyon, who maintains a hold rating on the firm’s stock, said he expects Nike to miss consensus estimates and post sales growth of 5 percent and EPS of 51 cents.

Meanwhile, Susquehanna Financial Group analyst Sam Poser, rating Nike a buy, calls for a solid beat on Tuesday.

“Nike innovation is robust, value has been enhanced and engagement is improving,” Poser wrote on March 15. “Nike is marrying performance and lifestyle attributes in a way that resonates deeply. 3Q17 marks an inflection for revenue and futures.

Poser predicted Nike’s revenues will grow 7.3 percent, while EPS will reach 56 cents. But he and Lyon both agree that after several quarters of double-digit futures growth last year, the company’s gains in that area will continue to taper. Futures orders — a calculation of merchandise the company has committed to delivering to retailers during the next six months — are a unique measure for Nike and have long been regarded as a key indicator of its growth.

But in tandem with weakening futures last September, the company told investors that it would change how it reports futures results. Instead of reporting futures as a standalone metric in its earnings releases — as it had done up until that point — it will now just include them in U.S. Securities & Exchange filings and discuss them on quarterly conference calls with investors.

For his part, Lyon called for global futures growth of 1.5 percent in Q3; Poser predicted a 2 percent climb.

While Lyon suggested that waning futures orders are further testament to Nike’s declining popularity, Poser sees it as less significant going forward.

“Futures order growth is not likely to correlate as closely to revenue growth as it has in the past,” Poser noted.

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