Nike’s Next Earnings Report Could Show Impact of Tariffs on Production

Continued momentum in both the U.S. and international markets, improved product innovation and buzzy ad campaigns are driving positive forecasts for Nike Inc. as it prepares to deliver its second-quarter earnings report on Thursday.

But during a critical holiday shopping season, the athletic giant isn’t immune to investors’ concerns over tariffs — an issue that analysts expect could have some impact on its performance in the months ahead.

“The question mark in my mind will be whether tariffs and other trade-related factors will continue to pressure cost of production and to what extent,” Daniel Martins, the head analyst of D.M. Martins Research, wrote in a note.

Despite a 90-day truce, the ongoing dispute between the U.S. and China has already contributed to a volatile stock market as well as mounting costs for retailers. (Washington has already slapped levies on $250 billion worth of Chinese imports this year, with Beijing retaliating through tariffs on $110 billion of American goods.)

Nike has been steadily moving production away from China and to Vietnam. However, its business in China continues to be robust. In its most recent earnings conference call in late September, the Oregon-based company reiterated its strong growth in global markets, led by greater China, which expanded at 20 percent.

It also reported first-quarter profits that rose 15 percent to $1.1 billion, or 67 cents per share, ahead of Wall Street’s predicted 63 cents per share. Revenues climbed 10 percent to $9.9 billion, roughly in line with market watchers’ bets.

“Our currency-neutral growth and profitability is exceeding our expectations,” CFO Andy Campion said in the call. “At the same time, global trade uncertainty and geopolitical dynamics have resulted in the dollar strengthening and foreign exchange shifting to a slight headwind over the past 90 days.” (Nike maintained its full-year guidance for the 2019 fiscal year.)

Since then, the retailer participated in major holiday sales events including Singles’ Day in China as well as Black Friday and Cyber Monday in the U.S. It also staged a collaborative track-and-field-themed presentation during Paris Fashion Week in September, celebrated the 20th anniversary of the Air Max Plus and opened a 3,290-square-foot store in Dubai, United Arab Emirates.

Analysts at Jane Hali & Associates LLC also forecast a positive outlook for Nike, citing wide product offerings, engaging social media campaigns and top-notch in-store experiences. “Promotional cadence was a mixed bag in Q2, given the holiday sales across the globe,” a report from the retail investment research firm added.

For the second quarter, consensus estimates place the firm’s revenues at $9.17 billion, with earnings per share of 46 cents — a flat figure compared with the same period last year. Sales are expected to increase 7.2 percent year over year.

Nike shares were down 0.3 percent at $70.94 at 11:40 a.m. ET.

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Nike’s Next Earnings Report Could Prove It Isn’t Budging From the No. 1 Spot

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