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Analysts: Nike’s Pandemic Strength Persists

Nike Inc. is expected to continue its momentum in what has otherwise been a tough few months for the broader retail sector.

As the brand prepares to release second-quarter results after the market close on Friday, analysts are near unanimous in their optimism regarding the brand’s strength.

On Dec. 8, Cowen analyst John Kernan raised his price target and Q2 estimates for the athletic behemoth, citing digital momentum and the brand’s “global position in sport and fashion.”

Kernan, who described Q2 consensus estimates as conservative, predicted Nike’s revenues during the period will rise 6% on a reported basis and 4% on a currency-neutral basis — compared with consensus estimates for 2% growth. He further anticipated that earnings per share will reach 73 cents versus consensus bets of 61 cents.

“Our Athlete Beat report, which tracks top sellers at Nike.com, Foot Locker.com and StockX.com, indicates an increasing diversity across [Nike] men’s and women’s,” Kernan wrote.  “Women’s remains a huge opportunity within the Consumer Direct Offense … Nike appeared to be one of the least promotional among our coverage list for Black Friday/Cyber Monday promotions [and] all our contact sacross the industry remain bullish on the product cycle into ’21.”

Nike unveiled the Consumer Direct Offense in 2017, a strategy it said would amp up its connectivity to consumers via more direct selling as well as digital innovation. This year, it unveiled the next phase of that plan, Consumer Direct Acceleration, which is focused on increased investments in e-commerce and technology, as well as a more simplified “consumer construct” of men’s, women’s and kids’ businesses. (The changes, it noted in an updated filing with the state of Oregon this month, would also result in the layoffs of 700 or so employees at its corporate headquarters.)

A report by market research firm Placer.ai this week indicated the brand has enjoyed ongoing strength in store traffic even as it ramps up digital investment. While Nike, like the rest of fashion retail, had to contend with uneven store visits in tandem with COVID-19 spikes and subsequent government orders, Placer data shows its traffic in October had “all but completely recovered.”

“Using location analytics to analyze Nike’s retail strategy puts its offline push in a particularly positive light demonstrating the opportunity that exists there,” read the report. “The brand kicked off 2020 with significant year-over-year growth, and while the pandemic made its impact felt, the recovery has been impressive. By September, visits were down just 11.4%, only to be surpassed by October visits that saw the gap shrink to just 1.9%.”

Still, November saw store visits dip back down to 22.9% largely “on the back of” visit declines across all of retail on Black Friday, Placer said. But since overall Black Friday traffic was down 44.5%, per Placer, Nike’s declines continue to show it bucking most negative industry trends.

BTIG analyst Camilo Lyon was also upbeat on the Swoosh headed into Friday’s results, indicating that its digital strength has been key while COVID-19 issues weighed on store traffic.

Lyon said he expects the company to show ongoing growth in China during Q2 and estimates its overall sales will be up 1% with “upside to 3% to 4% growth.”

Although it stock was in the green modestly ahead of market open today, shares for Nike are down 1% to $137.60 as of 11:55 a.m. ET.

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