Expect supply chain issues, analysts say – Footwear News

Nike is expected to release its first quarter results on Thursday, September 29.

Ahead of the report, analysts remain cautious about their outlook for the athletics giant, given recent supply chain headwinds in China. In the fourth quarter, Nike beat earnings and revenue expectations and reported net income down 5% to $1.4 billion, or 91 cents per share.

Nike is still widely regarded as the company to beat in the sports market. But like other global brands, Nike has recently faced significant headwinds from factory and store closures in China and Vietnam, supply chain slowdowns and port congestion in the United States. United. Analysts said those issues will likely weigh on the company’s first-quarter results next week.

Williams business 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, currency headwinds are worsening, and a shipment bottleneck is likely as late shipments and pending shipments arrive at the same time. “, Poser wrote in a Sept. 20 note to clients from which he gave Nike a “Hold” rating.

Given these headwinds, Poser said it’s possible Nike will need to implement a more robust promotional strategy throughout the year, though it’s unclear if Nike will need to alter its distribution strategy. bulk.

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

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

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

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

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

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