Nike NKE drops over 10% in premarket trading after the company reported the first fiscal quarter that disappointed investors due to rising inventories and low margins
Nike’s net income drops 22% to $1.5bn or $0.90 per share for the fiscal quarter ending August 2022. The previous quarter’s net income was 1.51 billion or $0.93 per share. The revenues increased 4% to 12.7$ billion topping analysts’ expectations.
Inventories increased by 44% to $9.7 billion as the number of goods in transit increased due to difficulties in the supply chain. The company’s gross margin fell to 44.3% driven by rising logistics costs and lower margins from markdowns and the strong U.S dollar. Forex negative impact will cost $4 billion in revenues and $900 million in EBIT. NKE was forced to liquidate the extra inventory through wholesale and Direct sales.
Revenue in North America rose 15% to $5.5 billion. Sales in Europe, Middle East & Africa rose 9% to US$3.25 billion. China sales were 16% lower over the year to $1.65 billion.
Analyst Reaction to Nike Earnings
Jefferies in a research report following the earnings report cut the Nike price target from $130 to $115.
Cowen also cut the stock price target from $127 to $124.
Wedbush analyst T. Nikic kept the Outperform rating and reduced the stock price target from $121 to $101.
Gabriella Carbone, Deutsche Bank analyst keeps the Buy at Nike but cut the price target from $123 to $99.
RBC Capital Markets analyst Piral Dadhania, reduced the stock price target down from $125 to $115.
Nike stock finished yesterday’s trading session 3.41% lower at $95.33. The stock is down 5.78% in the quarter and 42.80% since the beginning of the year 2022 underperforming the broader market. S&P500 has lost 23.62 since January 1, 2022.
The technical picture for the stock has deteriorated since September 12 when the stock broke below the 50-day moving average for the second time.
Nikolas has been involved in the finance industry for over fifteen years spanning across Europe and USA with a depth of knowledge and experience within many aspects of the financial markets. Nikolas gained several years experience with some of the Europe’s leading Brokers, as equity analyst, and trader managing accounts for both Private and Corporate Investors. He enjoys both the fundamental and technical aspects of trading focusing on stock markets and all FX majors. Currently, Nikolas provides analysis and comments to online financial publications. Educational background in Economics (BSc), and Finance (MSc).