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Nike earnings preview: What to expect

Reggie Wade
·Writer
·3 mins read

Sportswear giant Nike (NKE) will report Q1 earnings after the bell on September 22. Analysts polled by Bloomberg expect Nike to report adjusted earnings per share of 46 cents on revenue of $9.1 billion.

The consensus among analysts is for the Swoosh brand to have a strong quarter despite some lingering headwinds of the pandemic.

“We’re still going to see coronavirus impact this quarter,” said UBS Analyst Jay Sole, who predicts that Nike’s Q1 earnings to be in-line with expectations. He tells Yahoo Finance that Nike continues to adapt and dominate the e-commerce landscape and still has loyal customers who clamor for its products.

The logo of Nike sportswear maker is seen at a company's store at Tbilisi Mall in Tbilisi, Georgia, April 22, 2016. REUTERS/David Mdzinarishvili
The logo of Nike sportswear maker is seen at a company's store at Tbilisi Mall in Tbilisi, Georgia, April 22, 2016. REUTERS/David Mdzinarishvili

Sole notes that Nike’s biggest problem is getting retailers more products when they sell out. “Nike products are selling out, but one problem is that with certain items, they have not been as quick to restock retailers shelves.” This, according to Sole, represents the lingering effects that the COVID-19 pandemic has had on the company, and that may show up on Thursday’s report.

Sole says that one of Nike’s strengths is the fact it is a forward-thinking company. However, he tells Yahoo Finance that the Swoosh brand needs to manage its supply chain to have stronger future quarters.

According to Matt Powell, NPD Group Senior Sports Industry Advisor, supply chains often span multiple countries and factories, so problems within are often hard to pin down.

“Nike was very aggressive during the quarter, both in terms of promotional activity and additional releases of limited edition products,” he said. One such limited edition item is the Nike SB Dunk Low Grateful Dead, which honors the iconic rock band and now sell on the resale market for about $1,200.

Nike SB Dunk Low Grateful Dead — NIKE
Nike SB Dunk Low Grateful Dead — NIKE

Cowen Equity Research analyst John Kernan believes that Nike’s popularity and increasingly dominant online presence will carry the company to strong Q1 results.

“I think everybody knows that their product cycle is on fire across men’s, women’s footwear apparel, Nike, Jordan, all of it. Their digital business seems to be scaling at an increasingly rapid rate. The SNKRS app, the Nike training club app, Nike membership through all their different apps is really growing at an incredible pace. It’s amazing to see a company of this size, scale at an increasingly faster rate in the digital marketplace.”

Kernan tells Yahoo Finance that Nike’s new management team led by CEO John Donahoe has done a great job. He says that investors are excited to see what they have in store. However, the Cowen analyst said that it would be hard to gauge as far as what impact the COVID-19 pandemic will have on earnings.

HONG KONG, CHINA - 2020/08/31: American multinational sport clothing brand Nike store, logo, with a slogan "Just Do It" in Hong Kong. (Photo by Budrul Chukrut/SOPA Images/LightRocket via Getty Images)
HONG KONG, CHINA - 2020/08/31: American multinational sport clothing brand Nike store, logo, with a slogan "Just Do It" in Hong Kong. (Photo by Budrul Chukrut/SOPA Images/LightRocket via Getty Images)

“It’s hard to say. I mean, obviously, there’s still a lot of disruption in their wholesale channel, particularly in North America. So there’ll be a drag from that. Investors are going to look past most of that and try to figure out what earnings in their back half of the year,” he said.

“I expect Nike to beat first-quarter expectations, pretty handily on sales and gross margin, to be honest.”

Reggie Wade is a writer for Yahoo Finance. Follow him on Twitter at @ReggieWade.

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