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Here's How NIKE (NKE) is Positioned Ahead of Q1 Earnings

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NIKE Inc. NKE is slated to release first-quarter fiscal 2022 results on Sep 23. The leading sports apparel retailer is likely to have witnessed sales and earnings growth in the quarter under review. Strong digital momentum across all regions has been aiding the company’s top line.

The Zacks Consensus Estimate for fiscal first-quarter revenues is pegged at $12.56 billion, suggesting an 18.5% increase from the prior-year quarter’s reported figure. The Zacks Consensus Estimate for the company’s earnings for the fiscal first quarter is pegged at $1.12 per share, suggesting growth of 17.9% from the year-ago reported figure. Earnings estimates for the fiscal first quarter have moved up by a penny in the past 30 days.

In the last reported quarter, the company delivered an earnings surprise of 82.4%. Its bottom line has beat the consensus estimate by 56%, on average, over the trailing four quarters.

NIKE, Inc. Price and EPS Surprise

NIKE, Inc. Price and EPS Surprise
NIKE, Inc. Price and EPS Surprise

NIKE, Inc. price-eps-surprise | NIKE, Inc. Quote

Key Factors to Note

NIKE has been benefiting from the return of sports activity, the reopening of stores, wholesale business strength and digital growth, owing to permanent shifts toward digital and health & wellness. Strong customer connections through compelling brand experiences across NIKE Jordan and Converse, product innovation, and expanding digital advantage have been key drivers.

NIKE’s efficient digital ecosystem, which comprises its online site as well as commercial and activity apps, has become the primary channel to engage and serve customers. This has been aiding digital sales growth for the past few quarters. Even as stores reopen, the company is likely to have witnessed strong digital trends in the fiscal first quarter, demonstrating the strength of its brands and investments made over the past several years to improve digital consumer experiences.

Higher full-price product margins, owing to the geographic mix and favorable digital mix, are expected to have aided the gross margin in the to-be-reported quarter. The company is likely to have benefited from the anniversary of last year’s higher costs, including lower factory cancellation charges, lower inventory obsolescence reserves and a favorable rate impact of supply-chain fixed costs on a higher volume of wholesale shipments.

However, the company is expected to have witnessed higher SG&A expenses, owing to higher operating overhead and demand-creating expenses, driven by the return of sporting activities and events as the effects of the pandemic fade away. Spends related to sporting events, consistent store-operating schedules and investments against its largest opportunities are expected to have resulted in higher SG&A expenses.

The company’s fiscal first-quarter revenues are expected to have reflected continued impacts of the adverse market dynamics in Greater China due to boycotts related to the reports of forced labor in Xinjiang. On its last reported quarter’s earnings call, management noted that the slowdown trends in China continued into June. However, it noted that revenue trends slightly improved from the decline witnessed in May. The persistence of softness in China sales is expected to have weighed on the company’s overall revenues.

NIKE has been facing increased uncertainty from 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 Vietnam factories in the past two months. NIKE has about 51% of footwear and 30% of apparel units (43% of total units) in Vietnam.

The company is also expected to have witnessed supply-chain disruptions due to congestion at ports, freight inefficiencies, displacements in the container market, and higher freight costs, which have been impacting the whole industry. This is likely to have caused short supplies as well as higher freight expenses in the to-be-reported quarter.

Zacks Model

Our proven model does not conclusively predict an earnings beat for NIKE this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Stocks Poised to Beat Earnings Estimates

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Crocs, Inc. CROX has an Earnings ESP of +1.20% and it currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Boyd Gaming Corporation BYD has an Earnings ESP of +5.42% and it presently flaunts a Zacks Rank #1.

Rent-A-Center, Inc. RCII has an Earnings ESP of +1.12% and it currently sports a Zacks Rank #1.

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NIKE, Inc. (NKE) : Free Stock Analysis Report

RentACenter, Inc. (RCII) : Free Stock Analysis Report

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Crocs, Inc. (CROX) : Free Stock Analysis Report

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