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Nike Inc is expected to post a strong second-quarter sales boost as it offered deep discounts on its athletic shoes and apparel to keep wary shoppers interested in its brand and eliminate excess inventory.
Analysts forecast a nearly 11% increase in quarterly sales as a rebound in its U.S. business could help overcome weakness in the Chinese market.
“While retailers were initially concerned about the amount of Nike inventory being shipped, the consumer is showing up and buying the Nike brand,” Credit Suisse analyst Michael Binetti wrote in a note Friday.
“Most retailers have been at a worrying level of Nike inventory for 2 years and are just happy to have enough to push their apparel and footwear categories forward at this point,” Binetti said.
THE CONTEXT
Brokerage advisory group Telsey said last week that better-than-expected sales from retailers like Foot Locker Inc and Dick’s Sporting Goods Inc indicated Nike’s success in enticing inflation-weary shoppers with discounts.
While the discounts helped eliminate unsold inventory at Nike, which had $9.7 billion in inventory at the end of last quarter, they may have come at a cost, as analysts forecast a margin target. on the decline.
Lockdowns in China in October and November are also expected to dampen its sales in the region for the second quarter. The company reported a 20% drop in revenue in Greater China over the same period last year and a 16% drop in the previous quarter ended August 31.
However, the reduction in inventory, the reopening of China and strong demand from sneakerheads should set the company up for a better second half.
THE FUNDAMENTALS
** On average, 26 analysts forecast Nike’s second-quarter revenue to rise about 11% to $12.57 billion, with China sales expected to fall 6% and North America sales expected to jump nearly by 21%.
** Q2 earnings per share are expected to reach 65 cents
WALL STREET FEELING
**Nike shares are down more than 36% this year. By comparison, the Dow Jones Industrial Average fell about 9%, while the S&P 500 is down 19%.
**Nike stock has a consensus “buy” rating among 38 brokerages, with 25 rating “buy” or higher, 11 saying “hold” and two “sell” or lower
** At least eight brokerages have raised their price targets since early December and currently have a median price target of $120, up from $110 in November
Learn more:
For Nike, is the worst over?
The sportswear giant has struggled this year with inventory issues and a slowdown in China. His results this week could show that he has turned a corner. That, plus what else to watch for in the coming days.
