Home Nike store Here’s how NIKE (NKE) is positioning ahead of first quarter results

Here’s how NIKE (NKE) is positioning ahead of first quarter results


NIKE Inc. NKE is expected to release its first quarter of fiscal 2022 results on September 23. The leading sportswear retailer is expected to see sales and profit growth in the quarter under review. Strong digital momentum in all regions has helped the company’s turnover.

Zacks’ consensus estimate for fiscal first quarter revenue is set at $ 12.56 billion, which suggests an 18.5% increase from the figure reported in the previous year’s quarter. Zacks’ consensus estimate for the company’s first fiscal quarter earnings is set at $ 1.12 per share, suggesting growth of 17.9% from the figure released a year ago. Profit estimates for the first fiscal quarter have risen by a dime in the past 30 days.

In the last published quarter, the company made a surprise profit of 82.4%. Its net profit has exceeded the consensus estimate by 56%, on average, over the past four quarters.

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Key factors to note

NIKE has benefited from the return of sports activity, the reopening of stores, the strength of wholesale and digital growth, due to the continuous move towards digital and health and wellness. Strong customer relationships through compelling brand experiences on NIKE Jordan and Converse, product innovation and the expansion of the digital advantage were key drivers.

NIKE’s efficient digital ecosystem, which includes its online site as well as business and activity applications, has become the primary channel for engaging and serving customers. This has contributed to the growth of digital sales in recent quarters. Even with the stores reopening, the company likely saw strong digital trends in the first fiscal quarter, demonstrating the strength of its brands and the investments made in recent years to improve digital experiences for consumers.

Higher margins on full-priced products, due to the geographic mix and the favorable digital mix, should have contributed to the gross margin for the quarter to be published. The company likely benefited from the anniversary of higher costs last year, including lower factory cancellation fees, lower inventory obsolescence reserves and a favorable impact of chain fixed costs. supply on a higher volume of wholesale shipments.

However, the company is expected to have experienced higher SG&A expenses, due to higher operating overheads and demand creation expenses, driven by the return of sporting activities and events as the effects of the pandemic. fade away. Spending on sporting events, consistent store operating hours, and investing in its most important opportunities are expected to have resulted in increased selling and administrative expenses.

The company’s first-quarter tax revenues are expected to have reflected the continued impacts of unfavorable market dynamics in Greater China due to boycotts related to reports of forced labor in Xinjiang. In its last quarterly earnings release, management noted that the slowing trend in China continued in June. However, he noted that income trends have improved slightly from the drop seen in May. The continued weakness in sales in China is expected to have weighed on the company’s overall revenue.

NIKE faces increased uncertainty due to manufacturing disruptions in Vietnam due to a new wave of COVID-19 outbreaks in the region. This has resulted in almost zero production from its Vietnamese factories over the past two months. NIKE owns around 51% of the shoe units and 30% of the clothing units (43% of the total units) in Vietnam.

The company is also expected to have experienced supply chain disruptions due to congestion at ports, freight inefficiencies, shifts in the container market and higher freight costs, which have impacted the business. entire sector. This is likely to have caused a shortage of supply as well as higher freight costs in the reportable quarter.

Zack model

Our proven model does not conclusively predict an increase in profits for NIKE this time around. The combination of a positive earnings ESP and a Zacks # 1 (strong buy), 2 (buy) or 3 (hold) ranking increases the odds of beating the winnings. But it is not the case here. You can discover the best stocks to buy or sell before they are flagged with our ESP Earnings Filter.

NIKE has a Zacks Rank # 2 but an ESP on earnings of -2.24%.

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