What to Expect When Nike Reports Q1 Earnings Next Week

Nike is set to report earnings for the first quarter on Thursday, Sept. 29.

In advance of the report, analysts are remaining cautious on their outlook for the athletic giant, given recent supply chain headwinds in China. In Q4, Nike beat expectations for earnings and revenues, and reported a net income down 5% to $1.4 billion, or 91 cents per share.

Nike is still widely considered the company to beat in the athletic market. But like other global brands, Nike has recently faced significant headwinds related to factory and store shutdowns in China and Vietnam, supply chain slowdowns and port congestion in the U.S. According to analysts, these issues will likely weigh on the company’s first quarter results next week.

Williams Trading Analyst Sam Poser noted that while sales and shipments of the company’s Jordan brand and Air Force 1 product have improved, overall visibility is still murky.

“Trends in China remain uncertain due to ongoing pandemic-related lockdowns, foreign exchange headwinds are worsening, and a shipment bottleneck is likely as late shipments and current shipments arrive at the same time,” Poser wrote in a Sept. 20 note to clients in which he gave Nike a “Hold” rating.

Given these headwinds, Poser said it is possible that Nike will need to implement a more robust promotional strategy through the year, though it is unclear if Nike will need to shift its wholesale distribution strategy.

In his preview for Nike’s earnings, Cowen analyst John Kernan also noted that China “remains a major swing factor” for Nike’s potential results in Q1. However, the analyst said he expects China to return to growth in Q2 and added that “Nike continues to significantly outperform Adidas globally from an execution standpoint.”

Analysts from Jane Hali & Associates (JHA) LLC also mentioned potential headwinds in China, but added that Nike’s performance in EMEA and North America could offset the losses. Overall, JHA said it was “Neutral” on Nike for Q1, though optimistic about its long-term potential.

“Nike is one of the most modern brands across its product and retail strategy,” JHA said in a note to clients. “The brand puts the consumer at the center of its evolution and uses data-driven insights to create a localized approach that reaches consumers across the globe.”

Morgan Stanley analysts in a Wednesday note to clients also noted Nike’s long-term potential, despite a rough macroeconomic environment, supply chain issues, problems in Greater China and a potential recession threat.

“While the long-term opportunity remains compelling, macroeconomic deterioration and limited visibility makes current discounted valuation fair, in our view,” the note read. “And until visibility improves, we see more attractive opportunities elsewhere in our coverage.”

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