By Uday Sampath Kumar

(Reuters] – Wall Street takes a gloomy look at the future Nike Inc (NYSE) is set to release its quarterly results Monday. Rising COVID-19 in China and Russia-Ukraine crises, along with lingering supply problems, threaten to impact the 2022 sportswear company’s sales.

On Wednesday, at least 10 brokerages reduced the price targets for this stock because they fear that strong demand from North America’s sneaker market will be countered by persistent shortages due to factory closings in Vietnam last year.

Nike’s current quarter will also be hit by slowing China shopping traffic due to COVID-related infections. Also, the temporary shuttering of Russia’s online stores following Moscow’s invasion is likely to cause a significant impact on Nike’s financial results.

Jefferies analyst said that the recent spike in geopolitical uncertainty and rise in oil price have created a risk for slowing growth in Nike’s international markets.

THE CONTEXT

Nike’s primary rival Adidas (OTC) Inc reported earlier this month that there was a “knock to sales” from Russian operations closing and Vietnam COVID disruptions.

Credit Suisse (SIX.) The analysts have cut the forecast for Nike’s quarter-end revenue growth in Europe from 15% to 7%. This was largely due to a estimated 2% reduction in total Russian sales.

However, despite the higher price tag and an increase in direct sales to customers are likely to reduce pressure on Nike’s margins from higher supply chain costs.

There is much strength still in Nike’s retail strategy and product. Those two strategies are key for its future,” said Jessica Ramirez, retail analyst at Jane Hali & Associates.

Graphic: Nike Q3 revenue: https://fingfx.thomsonreuters.com/gfx/buzz/egvbkqzrlpq/nike.png

THE FUNDAMENTALS

* Analysts on average expect Nike to report third-quarter revenue of $10.59 billion, down from $10.63 billion at the start of this week. Third-quarter revenue last year was $10.36 billion * Full-year revenue expectations have taken an even bigger beating since Monday, slipping to $46.90 billion from $47.06 billion * Third-quarter revenue from China is projected to fall nearly 12% to $2.01 billion, after slumping 19.8% in the prior quarter * The company is expected to report third-quarter earnings per share of 71 cents, according to IBES data from Refinitiv, compared with the 76 cents reported a year earlier * The Dow component has declined over 22% since the start of this year to Thursday’s close, compared with the 5.1% fall in the index for the same period

Graphic: Nike’s China sales performance: https://graphics.reuters.com/NIKE-RESULTS/gdpzybzxrvw/chart.png

WALL ST. SENTIMENT

* The current average analyst rating on NKE shares is “buy”, with 29 rating it “strong buy” or “buy”, seven rating it a “hold” and two rating it a “sell” or “strong sell”.

* The mean price target is $168.24, down from $181.35 at the start of March