Nike Gets Lackluster Reviews From Experts Ahead of Q1

After years of inarguable athletic industry dominance, the tone seems to be changing for Nike Inc.

While the company’s market cap will remain uncontested for some time, ahead of Tuesday’s Q1 earnings report, more and more experts are tapering down their expectations.

Market data and industry read throughs suggest that Nike’s recent North America sales growth rate has remained sluggish amid a recent fashion trend change and less impactful innovation lately,” UBS Investment Bank analyst Michael Binetti wrote today. “We expect mixed quality Q1 results.”

Consensus estimates peg the brand’s first-quarter diluted earning per share at 56 cents — 9 cents below the year-ago quarter’s diluted EPS. Despite being down on Nike in his note, Binetti placed his EPS bet, two pennies above consensus, at 58 cents.

Canaccord Genuity Inc. analyst Camilo Lyon also predicts EPS of 58 cents but said his “concerns on Nike are mounting.”

While Q1 results due to the highly conservative guidance issued last quarter, we believe the more important metric to watch will be futures orders,” Lyon wrote.

Both Lyon and Binetti predict that global futures will decelerate, to 5.6 percent and 8 percent, respectively, which would follow last quarter’s deceleration to 11 percent.

Lyon said he expects competitive pressures from Adidas and Under Armour to play a pivotal role in the deceleration as well as a lack of exciting product, inventory buildup in China and Western Europe and a post-Olympics slowdown.

The less-than-optimistic chatter follows a softer than expected Q4, in which the brand experienced a sales and gross-margin miss, ongoing deceleration in North America, and earnings per share just a penny higher than consensus.

For her part, Citi Research analyst Kate McShane said that although Nike may be “one of the most controversial names in apparel/footwear,” she is maintaining a buy rating on the stock.

Over the long term, we remain confident in Nike’s global secular growth story, supported by double-digit futures growth in Western Europe, China, Japan, and [emerging markets], solid continued growth in North America and supply chain innovation,” McShane wrote on Sept. 20. “Though other global brands are showing increased momentum, this isn’t the first time (nor the last), and we believe Nike has the scale and brand power to maintain share in what is still a growing category.”

Wall Street consensus predicts that Nike’s Q1 revenues will gain 5.5 percent, to $8.9 billion.

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