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Analysts Say DTC and Digital Growth Will Fuel Nike’s Comeback in Earnings Next Week and Beyond

Nike is set to report earnings results for the second quarter of fiscal year 2022 on Monday.

The Swoosh missed revenue expectations last quarter, but analyst are confident in the brand’s ability to post strong results for the upcoming quarter and regain the momentum it lost. Like other footwear brands, Nike was hit hard by factory closures in Vietnam throughout the summer as well as global supply chain delays. But analysts say that Nike is still a good bet for long term success.

“The global health of, and demand for, the Nike brand remains at historically high levels,” wrote Williams Trading analyst Sam Poser in a recent note in which he gave Nike a “Buy” rating. In his analysis, Poser said that supply chain disruptions had not stopped Nike from delivering product at better than anticipated rates and that the brand’s shift towards DTC channels has helped improve its business overall. Similarly, Cowen analyst John Kernan said in his earnings preview for Nike that “factory closures in Vietnam did not persist as long as feared.”

Poser added that the impact from supply chain and factory issues will we felt through the third quarter but will ultimately ease throughout the fiscal year, making Nike a good longterm bet.

Despite the last few difficult quarters, Nike has had some major wins in recent months. Earlier this week, Nike acquired RTFKT, a digital creator of virtual sneakers, collectibles and accessories, in a bid to expand its influence in the metaverse. Stifel analysts said the acquisition has “strategic value” to help “expedite the expansion into Nike’s potential NFT offerings.” 

NPD analyst Matt Powell specifically called out Nike’s success with its loyalty programs, which he said have “set the standard for the industry.”

Perhaps most striking, Nike has doubled down even further on its DTC strategy. In 2022, partnerships with certain retailers such as DSW will end, which means that more product will be directed through Nike’s own stores and websites. For these reasons and more, analysts and experts continue to refer to Nike as a market leader, despite recent headwinds.

“Consistent performance, strong digital sales, and the continued shift towards DTC gives Nike a leg up on any other brand,” said Liza Amlani, principal and founder of consulting company Retail Strategy Group, said. “Nike is a market leader and as it strives for speed to market and getting closer to the customer across all channels, it will continue to grow.”

Kernan also called out Nike’s digital connection with consumers as a major benefit to being the “preferred athletic apparel brand.”

And even as smaller brands encroach on Nike’s dominance in certain categories, like women’s running, experts say it is unlikely that Nike will ever be toppled for good.

“The future for Nike will always be promising,” Amlani said. “Smaller and innovative brands will only give Nike the push to continue to evolve.”

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