Nike Prepares for Dismal Results Ahead of Quarterly Report

Photo Credit: Rafael Castillo

Nike Inc (NKE) Consumer Discretionary - Textiles, Apparel & Luxury Goods | Reports March 21, After Market Closes

Nike headlines a slow week of earnings with its highly anticipated fiscal third quarter report tomorrow afternoon.  Dismal reports from Under Armour and other footwear retailers this earnings season portends pressure to the downside for Nike’s announcement. As a result analysts at Estimize cut earnings estimates 11 percent and revenue 2 percent from previous forecasts at the end of the fiscal second quarter. Despite some obvious near term headwinds the stock jumped 15.2 percent higher in the past 3 months and historically performs well immediately through an earnings report.

The Estimize consensus data earnings of 55 cents per share, reflecting a 3% increase from a year earlier. Revenue for the period is forecasted to increase 5% to $8.47 billion, marking steady mid single digit revenue growth for 8 consecutive quarters. 

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The fiscal second quarter restored investors faith that Nike can somewhat stave off increasing competition, namely from Adidas, while still maintaining margins and future orders growth. In the three month period ending in November, gross profit came in at $3.62 billion with 44.2 percent margins. Future orders, on the other hand, slipped 4 percent in North America but still posted overall growth of 2 percent on a constant currency basis.  Management also reveal that it would discounting reporting future order figures, making margins all that more important moving forward.

With Adidas, Under Armour and Lululemon all making strides in the retail industry, Nike faces an uphill battle to remain king of the mountain. Nike’s clear market share lead, superb brand reputation and ongoing prowess for innovation and design will help maintain a significant gap between the competition. However growth opportunities in domestic markets are running out as Nike controls over 50% of the market in all major sporting segment. The best case for Nike is to expand global shares in Europe and Asia where its presence it doesn’t hold as pronounced presence.