Nike Inc (NYSE:NKE, ETR:NKE)'s fiscal first quarter earnings are expected to be the “status quo” as the announcement of a new CEO will push out the reveal of the longer-term plan, analysts at Bank of America believe.
The athletic apparel and footwear brand’s Q1 earnings should mark the trough for sales growth and peak selling, general and administrative deleverage from investments in customer-facing events such as the Olympics, analysts wrote in a note to clients.
Lifestyle direct-to-consumer exits and weakening international conditions without sufficient newness to replace sales volume are other key factors, they added.
Analysts forecast earnings per share of $0.48, below the $0.51 consensus, attributed to a more cautious China outlook.
“We are reducing our China growth outlook and now model Q1 sales in Greater China negative 10% versus consensus of negative 7% based on continued signs of weakening: a profit warning from China's largest sports retailer Topsports, sales deceleration at Pou Sheng and cautious commentary from Skechers at a conference,” they wrote.
“Nike’s Q1 China growth will also be hurt by several points from the earlier Tmall holiday that benefited Q4 sales.”
Nike’s quarterly sales are expected to decline by 10% to $11.64 billion, the Street projects.
The bank’s analysts expect Nike to reiterate its guidance, forecasting flat second half sales growth based on confidence around new products, plans to scale innovation and early order book indications.
They are looking out for details on the drivers of Nike’s recovery on the company’s earnings call and believe that narrative will be important for the stock.
“The announcement that Elliott Hill will take over as CEO likely pushes out the timing of the Analyst Day and an update on the longer-term plan,” analysts wrote.
“In the near term, a narrative of gradual improvement with milestones along the way would allay concerns of another earnings cut and should pave a path to better stock performance.”
Analysts repeated their ‘Buy’ rating on Nike and awarded it a $104 price target, implying upside of almost 20% from its share price at the time of writing.