Nike Q3 Earnings: No Signs of Slowing Down, Says Analysts

Nike shows no signs of slowing down yet as it prepares to report third-quarter earnings on Thursday after market close.

The athletic giant has seen its stock soar 22 percent since December, when it soared past Wall Street’s revenue and earnings estimates on double-digit sales growth. Analysts are bullish that it has kept up the momentum with consumers, too, with most forecasting strong results across regions, channels and categories, bolstered by Foot Locker’s recent impressive quarter.

Nike also stands to potentially gain from the supply-chain issues that competitor Adidas announced last week, which have affected the German company’s North American business. “Our checks indicate that the new platforms are helping Nike take market share from a floundering Adidas,” said Susquehanna Financial Group analyst Sam Poser in a note. “Lack of innovation out of Adidas footwear is hurting the brand, according to our conversations with retailers, and Nike has taken and continues to take full advantage of Adidas’ softening business.”

The Beaverton, Ore.-based company also has the upper hand thanks to its strong slate of products, including the VaporMax, Air Max 270 and Epic React styles. Several analysts also pointed to the ongoing turnaround of Jordan Brand, which has struggled in recent years due to flagging sales in the basketball category.

“Having returned to growth in Q2, we expect Jordan to accelerate sequentially in Q3 as we believe sell-thrus continued to strengthen on the back of a sharper launch calendar,” said Canaccord Genuity analyst Camilo Lyon. “Nike’s strategy of reducing inventory, diversifying the brand… and elevating the story-telling has returned it to a more appropriate demand/supply balance, a trend that is likely to accelerate sales and margins going forward.”

Other opportunities lie ahead in women’s — which currently accounts for less than 25 percent of Nike’s sales, despite the overall market being significantly larger than men’s. As investment research firm Jane Hali & Associates highlighted in a note to clients, Nordstrom recently added a sneaker drop feature to its site, and Nike dominates the featured product.

Finally, Nike grew its digital sales by 34 percent and 42 percent in Q1 and Q2, respectively, and analysts expect the channel to be its strongest growth driver going forward as it continues to invest in personalization and engagement, and launches its SNKRS app in Mexico, Brazil and Southeast Asia.

“In all, Nike is executing solid strategies and delivering innovative product to its digitally connected consumer, driving increasingly profitable growth while expanding the market,” said Wedbush Securities analyst Christopher Svezia.

For the third quarter, consensus estimates forecast revenues of $9.61 billion, with earnings of 65 cents per share — compared with $9 billion and 68 cents per share during the same period last year.

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