Nike Misses Q1 Revenue Estimates, Shares Fall

Nike Inc. reported results for the first quarter of 2022 that missed analysts’ expectations on the revenue side.

Overall, the athletic giant on Thursday reported growth, with revenues for the quarter at $12.2 billion, up 16% year over year. However, this fell short of estimates of $12.46 billion in revenues from a survey of analysts. Net income was $1.9 billion, up 23% year over year, with diluted earnings per share increasing 22% to $1.16, versus an expected $1.11.

Nike shares dropped in extended trading on Thursday and were down about 3% in the hour after it released earnings.

Nike direct sales were $4.7 billion, up 28% on a reported basis and up 25% on a currency-neutral basis, largely bolstered by a 24% growth in owned physical retail that exceeded pre-pandemic levels of Q1 of fiscal 2020.

According to data from Placer.ai, foot traffic at Nike stores did not surpass pre-pandemic levels in 2019 during June, July, and August. However, visits to Nike stores were up 39.6% in August compared to July and were up 22.1% during the week of September 6 compared to the same period in 2019.

Digital sales for the Nike brand grew 29%.

“Nike’s strong results this quarter are continued proof of our deep consumer connections, unrelenting innovation pipeline and a digital advantage that fuels our brand momentum,” said Nike president and CEO John Donahoe. “We have the right playbook to navigate macroeconomic dynamics, as we create value through our relentless drive to fuel the future of sport.”

Analysts predicted earlier this month that Nike’s earnings would be impacted by the ongoing factory closures in Vietnam, the second largest supplier of footwear to the United States behind China. Since July, factories in the region have have been shut down due to COVID-19-related issues, market watchers noted. The closures, which have gone on for nine weeks, have been especially problematic for athletic footwear and apparel brands that rely on supply operations in the region.

Nike has had almost two months of no unit production in Vietnam since two of its footwear suppliers in Vietnam stopped manufacturing in July. Vietnam previously accounted for 51% of Nike’s footwear and 30% of apparel units last year. In light of recent supply chain issues, BTIG downgraded Nike to neutral from buy prior to its earnings call.

“While NKE typically is incredibly well-equipped to manage such disruptions, we fear this issue is just too large to control, even for the best-run athletic brand in the world,” BTIG’s lifestyle and wellness analyst Camilo Lyon wrote in a note. “As such, we downgrade to neutral until better visibility is had around timelines for a return to normalized production and shipping schedules.”

Analysts Jim Duffy of Stifel and John Kernan of Cowen recently lowered their estimates for Nike’s full-year sales, citing the production shutdown in Vietnam from the pandemic.

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