Earnings Preview: Nike & Finish Line

Continued strength in the athletic footwear cycle is leading analysts to be upbeat on Nike Inc. and The Finish Line Inc., two companies reporting their quarterly earnings next week.

Analysts polled by Yahoo Finance are looking for athletic giant Nike to earn 97 cents a share in its second quarter, on revenue of $5.63 billion. The company reports its earnings next Tuesday after the market’s close.

Michael Binetti, analyst at UBS Investment Bank, believes upside for Nike stems from solid global sportswear trends.

“In the U.S., we believe compelling innovation in the mall channel drove strong full-price sell-throughs, and aggressive promotions drove share gains in new apparel categories during early holiday shopping [in the quarter],” he wrote in a research note.

Sam Poser, analyst at Sterne Agee, expects to see gains across all regions, led by strongest growth in Eastern and Central Europe, followed by greater China, then North America. He also expects futures orders to be up 14 percent on a currency-neutral basis.

“History has shown us that when Nike’s competitors begin to improve, Nike rises to the occasion with innovative new product launches and global initiatives, and we are already seeing such occur. We expect Nike will dominate their largest competitors as the European Championships and Olympics draw closer,” he wrote in a research note.

Meanwhile, Finish Line is expected to earn 11 cents a share, on revenue of $272.6 million, when it reports its third quarter after the market next Wednesday.

The retailer’s e-commerce business, in particular, is expected to be the star performer in the period.

“The company is growing this segment at more than 60 percent, and we suspect this trend likely accelerated in the third quarter around Black Friday,” said Camilo Lyons, analyst at Canaccord Genuity. “Digital is a key growth area and focal point for the company that should continue to be a meaningful contributor to overall comps over the next two to three years.”

He also added, “Ostensibly, the growth in digital is supported by strong undercurrents in the athletic cycle.”

Sales are expected to be driven by running and basketball, which are both experiencing a resurgence in demand. “Running and basketball are leading the strong athletic cycle with great new product, which plays into Finish Line’s sweet spot,” said Jeff Van Sinderen, analyst at B. Riley & Co.”Their merchandise margins are running the highest ever.”

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