Will Nike earnings surprise Wall Street? 🕤

The largest U.S. manufacturer of athletic footwear and apparel, Nike (NKE.US) will report its results for the fourth fiscal quarter of 2023 after today U.S. trading session. The report could affect the sentiment of all the industry's rival companies such as Adidas (ADS.US), Puma (PUM1.DE), Under Armour (UA.US) and Lululemon (LULU.US). It may also shed more light on the current condition of consumers in the US and beyond. Investors will pay attention to the performance in Chianese, where there may be a significant improvement on a year-over-year basis looking at the relevant period last year (closed economy). Will recessionary concerns - a weaker global consumer, lower sales and narrowing room for margins - weigh on the forecasts issued by Nike? Here's what analysts expect.

Revenue: $12.59 billion (2.9% y/y growth including about $5.28 billion from North America, $1.64 billion from China) (Bloomberg)

Earnings per share (EPS): $0.67 (24% y/y decline) (Bloomberg)

Full-year guidance: EPS $3.24 (down 14% y/y) and $50.98 billion in revenue (9.2% y/y growth) (FactSet)

Estimated online sales: 13.6% y/y growth 

Converse brand revenue: $612.6 million

Estimated gross margin: 43,5%

Inventory: $8.88 billion

What is Wall Street worried about?

• Nike may report full-year profit below forecasts due to weaker demand from wholesalers, orders will be key. Consumers in the US have been hit by inflation. Morgan Stanley indicated that demand for sportswear has slowed in the US and Europe (massive apparel promotions). Wholesale customer demand (more than half of revenue) for Nike has been declining for several years;
• Seven analysts, including Morgan Stanley have recently lowered expectations around Nike, and 10 have lowered their price targets on the stock ahead of the rap (including Deutsche Bank, Barclays). Retail chain Foot Locker, which recently renewed its partnership with Nike but indicated lower sales of 'sneaker' footwear in May. In March, Nike warned investors of lower earnings due to inventory. According to Barclays, however, the key for long-term investors will be the outcome of sales in China.

Nike stock (NKE.US) W1 interval. The MACD indicates a potential trend change, and the SMA200 and SMA100 averages continue to move closer together signaling potential longer-term weakness. However, the long-term trend is maintained (blue line). Source: xStation5

The manufacturer has recently recorded a significant decline in visits to stationary stores. The e-commerce trend also seems strongly uncertain in an environment of potential economic slowdown. Looking at the data, there are no very positive catalysts for revenue growth. Source: placer.ai, Reuters

•  Bloomberg assumes a very high share of sales gains in the North American region, which is expected to beat the result from Europe and Asia. U.S. sales will potentially be a fundamental factor in the perception of results. Its decline could prompt analysts to reassess Nike's business. Oppenheimer pointed to the potential for a positive surprise, in the analysts' view, market expectations are overly cautious although several retailers have recently suggested still solid demand;
• Bloomberg Intelligence highlighted the role of China, which could weigh heavily on the company or provide a significant positive contribution to the report and future business scale. Chinese Prime Minister Liang recently assured of broader fiscal stimulation in the country later this summer which could potentially translate into faster improvement in demand.  Nike will return to Macy's stores; the companies renewed their wholesale partnership earlier this year.

Nike is the leading global manufacturer of athletic footwear, with nearly 30% market share. Source: Reuters, Euromonitor