Nike's 2024 pressured by weak North American demand, inventory glut
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[June 28, 2023] By
Ananya Mariam Rajesh
(Reuters) - Nike is expected to forecast full-year profit below Wall
Street estimates, as demand for the sportswear giant's products from
wholesalers such as Foot Locker and Hibbett wanes in the United States
due to still-high inflation.
At least seven analysts trimmed their fiscal 2024 expectations for
Nike's earnings per share since the beginning of June and 10 slashed
their price targets on the company's stock, ahead of its fourth-quarter
results.
"Coming into this current calendar year ... wholesale orders are weak at
the moment," said Morningstar analyst David Swartz, adding that declines
in these orders will have a negative impact on Nike.
There have been heavier markdowns within sneakers in the United States,
said Jane Hali & Associates senior analyst Jessica Ramirez, adding the
U.S. market has been difficult and is quite volatile at the moment.
THE CONTEXT
In March, Nike warned of earnings pressure amid its attempts to get rid
of excess inventory through heavy discounts. It still reaped the
benefits of rival Adidas' disastrous breakup with the musician formerly
known as Kanye West last quarter as well as demand for Jordan Retro and
LeBron 20.
Sales to wholesale customers, which made up nearly 58% of total Nike
Brand revenues in fiscal 2022, have been on the decline as retailers cut
back on orders and become more prudent due to a drop in discretionary
spending among shoppers.
In May, retailer Foot Locker, which has touted its 'renewed'
relationship with Nike, also flagged declining sales, particularly for
fashion-oriented sneakers.
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Tennis and Croquet Club, London, Britain - June 28, 2022 The Nike
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Barclays analysts noted Nike could see "moderation, and potentially
negative, wholesale channel growth" in the fourth quarter.
Still, analysts expect a stronger rebound in China to offset the hit
to sales from cooling consumer appetite for higher margin products
in the North American region and help retain its top spot as the
world's leading sportswear brand.
THE FUNDAMENTALS
** Nike will report fourth-quarter earnings on June 29 after markets
close
** Nike is expected to report fourth-quarter revenue of $12.59
billion, a 2.9% rise from a year earlier, according to analysts
polled by Refinitiv
** Fourth-quarter profit per share is expected to be 67 cents
** Analysts expect Nike's fiscal 2024 revenue to rise 6.4% to $54.23
billion and earnings per share to be $3.91
WALL STREET SENTIMENT
** Nike shares have risen nearly 3% in the last 12 months
** The average rating of 38 analysts on Nike stock is "buy", with 24
rating it "buy" or higher - Refinitiv
** The median price target is $135
(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Krishna
Chandra Eluri)
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