Nike (NKE) about to report Q3 2022 earnings: Here’s what to expect
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The Nike Store, Miami Beach, Florida has shoes on display.
Joe Raedle – Getty Images| Getty Images
NikeThe Monday post-earnings remarks of Monday by ‘The Retail Industry in Ukraine: A Harbinger Of How the War and Rising Oil Prices Impact the Retail Sector.
Following market closings, Nike will release its financial results for fiscal quarter 3. The United States is closely monitoring Nike’s China exposure. may choose to impose consequences if Beijing helps RussiaIt wage war on Ukraine, and Western brands are subject to continued boycotts in Asia.
Nike stock shares dropped in the past week due to investors anticipating that the retailer will take some losses from these risks. The stock closed Friday at $131.24, down 21% year to date, compared with the S&P 500’s decline of 6%, and off a 52-week high of $179.10. However, analysts warn that shares may fall more.
According to Refinitiv’s survey, Nike will report $10.6 billion in fiscal third quarter revenue for 2022, with earnings of 71c per share.
These are the top topics that analysts expect Nike to address Monday.
Outlook is set for disappointment
Jay Sole from UBS believes Nike’s first fiscal outlook in 2023, and its fourth-quarter outlook, will disappoint investors.
Sole explained in a note that his checks indicated that Nike’s China business was not recovering at the pace we expected. Additionally, Sole stated that market have been misestimating the effect of global supply chain issues, which has delayed production and shipment, Nike’s. temporary suspension of business in RussiaHigher oil prices, and a higher U.S. Dollar will put pressure on Nike’s profit forecast.
Nike announced earlier this month that due to Russia’s rapidly changing situation and increased operational challenges it had decided to suspend its operations there. The extent of this pause is not known at the moment. Analysts estimate that the Russian retail store, which represents less than 2%, accounts for 116 percent of Russia’s overall sales.
Sole said that Nike’s third quarter report would cause investors to believe the company will see a rebound in earnings later than they currently think.
Refinitiv analysts polled see Nike’s total revenue increasing 2.3% in the fourth trimester compared to one year prior. Wall Street projects that Nike will sell $53 billion in fiscal 2023, an increase of 13% over the previous year.
China risk
Adrienne Yih, a Barclays analyst, said that China will pose a bigger problem for Nike in the long-term. China accounted for 19% Nike’s fiscal 2021 sales, which concluded on May 31.
The boycott of Western brands by Chinese citizens in China caused sales to drop at Nike and Adidas, among others. An outrage erupted over claims of forced labor within the cotton industry in the Xinjiang region where Uyghur Muslims make up a large minority. Although the Chinese government refuted these claims, brands like Nike vowed not to use Xinjiang Cotton.
On a conference phone call, Matt Friend, chief financial officer of Nike told analysts that Nike is seeing encouraging signs in China after reporting its second-quarter results. He said that fiscal 2022 would be an year of economic recovery for the company. John Donahoe, the Chief Executive of Nike, stated that Nike is taking a long-term approach to China and developing new products tailored for the Chinese market.
Kimberly Greenberger, a Morgan Stanley analyst, stated that Nike might not experience a catalyst for change until June or later.
Nike’s peers are also at risk from the renewed Covid lockdowns.
“[China]In a letter to clients, Greenberger stated that investors have been focused on this topic in recent years amid boycotts and inventory problems. Investors specifically debate whether the underperformance was demand driven or supply driven.” It’s highly unlikely that third-quarter results will resolve these unresolved issues.
Paul Lejuez, Citi Retail Analyst, said that his team conducted an earlier month survey with 1,000 Chinese customers to determine how they felt about Nike in comparison to other brands. Chinese customers continue to rate Chinese brand sportswear like Li Ning as equal or superior to Western brands. But, he stated that Adidas and Nike are in good standing.
Wholesale distribution plans
Analysts and investors should also be aware of Nike’s comments about its wholesale partnerships. In an effort to increase profits and build brand loyalty, Nike has made a shift to sell more apparel and shoes directly to customers.
Foot LockerNike’s most important vendor partner is. disclosed in late February that its mix of sales from Nike will fall from 65% in the fourth quarter of 2021 to 55%In the fourth quarter, 2022, there is a possibility that it will fall even further.
Credit Suisse analyst have estimated that Nike’s wholesale revenues could be affected by this loss, which is between $600 and $800 millions in the fiscal year 2023.
Michael Binetti, Credit Suisse Analyst said: “While we did not think Nike would pivot quickly enough to disrupt Foot Locker’s cash flows in such meaningful ways, we do understand why Nike would want these sales represented through its own channels.”
Direct-to-consumer revenues accounted for approximately 41% of Nike’s total business as of November 30. Investors will seek out more information on this number and the partners Nike will continue to rely upon.
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