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Nike (NKE) is expected to report results on its fiscal second quarter on Thursday, December 19, with a conference call scheduled for 5:00 pm EDT. What to watch for:

GUIDANCE: In October, Nike forecast second quarter revenue down 8%-10%, with gross margin down 150 basis points. In addition to postponing its investor day event, Nike withdrew its guidance for fiscal 2025 amid its CEO succession. CFO Matthew Friend commented that Nike's Q1 results "largely met our expectations," and that "A comeback at this scale takes time, but we see early wins." Morgan Stanley said Nike's Q1 earnings had "more for the bears than bulls," while Barclays called Q1 a "low-quality quarter."

Looking to Q2, Morgan Stanley expects a beat, Q3 guidance to be set below the Street view and continues to see risk to fiscal year consensus. Barclays forecasts a top- and bottom-line miss due to "franchise life cycle management," North America weakness, and an uncertain China market.

NEW CEO: Deutsche Bank lowered the firm's price target on Nike to $82 from $92 and keeps a Buy rating on the shares ahead of the Q2 earnings report. The company's new CEO Elliott Hill makes his official debut on the earnings conference call, and the key question entering the fiscal Q2 earnings is whether he will rebase expectations, the analyst tells investors in a research note. The firm says recent guidance pulls and resets have generally been welcomed by investors, essentially allowing new leadership to take the necessary steps to successfully implement turnaround strategies. To that end, it thinks investors "would be pleased with a clean slate. A deeper inventory and franchise reset and further investments in the business in the second half of 2025 could put Nike back on a growth path starting in fiscal 2026, contends Deutsche Bank.

Morgan Stanley thinks market focus is on commentary from the new CEO, not fundamentals. While Nike has "clearly been off their game in recent years," Needham believes that the worst may nearly be over and that the biggest catalyst of change is the recent CEO transition to well-respected Nike veteran Elliott Hill and that management is "clear-headed" about the mistakes they've made and are working to correct them. BofA noted that Nike officially pulled guidance last quarter in light of the CEO transition and then gave sales and margin guideposts for the year, and said that the question entering Q2 earnings is if new CEO Hill will reduce expectations further. The firm, which thinks investors "would welcome a clean slate from Hill," added that missing sales and gross margin after this quarter would "derail the building bull case."

CHANNEL CHECKS: Channel checks from UBS suggest Nike's global sales growth trends deteriorated over the last three months, and that this will lead to Nike reporting weak Q3 guidance that causes the stock's multiple to slide. The firm expects Nike gives Q3 implied EPS guidance of 47c-57c, below the sell-side's 66c forecast and the market's "bar," which it thinks is 55c-65c.

Foot Locker (FL) reported Q3 results below expectations and lowered its fiscal year guidance, with management highlighting weaker consumer trends following back-to-school and an elevated promotional environment, and Jefferies said the firm finds these results concerning for Nike as the company continues to see elevated promotions while ceding shelf space to competitors. Competition is more severe than in prior years and promos remain elevated, added the analyst.

EXECUTIVE CHANGES: During the quarter, Nike said that Treasure Heinle, Chief Talent Officer, will become the company's new Executive Vice President and Chief Human Resources Officer. She succeeds Monique Matheson who has decided to retire from Nike after 26 years with the company. The change is effective January 6, 2025. Additionally, Nike announced Tom Peddie will become Vice President, General Manager of the North America Geography, succeeding Scott Uzzell, who has decided to leave Nike. Peddie will lead all aspects of Nike's North America Geography, including Direct, Sales, Marketing, Digital, Consumer Construct and Territories, among others.

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