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Nike Down After Revenue Miss, Supply Chain Issues

   By Michael Dabaie 
 

Nike Inc. shares were down 7% at $148.44 Friday after the maker of athletic footwear, apparel and accessories reported first-quarter revenue below analyst expectations.

The company after the bell Thursday reported first-quarter revenue rose 16% to $12.2 billion, below FactSet consensus for $12.5 billion. Earnings per share of $1.16 beat FactSet consensus of $1.12.

Chief Financial Officer Matthew Friend said in the Nike's earnings conference call that "first-quarter financial results would have been even stronger if not for supply chain congestion resulting in lack of available supply. Despite these headwinds, retail sales still grew double-digits versus the prior year, including a record-setting back-to-school season in North America."

"Consumer demand for Nike remains at an all-time high, and we are confident that our deep consumer connections and brand momentum will continue. However, we are not immune to the global supply chain headwinds that are challenging the manufacture and movement of product around the world," Mr. Friend said. "Previously, I had shared that we were planning for transit times to remain elevated for the balance of fiscal 2022. Unfortunately, the situation deteriorated even further in the first quarter with North America and EMEA seeing increases in transit times due primarily to port and rail congestion and labor shortages."

Mr. Friend said the company now expects fiscal 2022 revenue to grow mid-single-digits on year, versus prior guidance of low-double-digit growth, due solely to the supply chain impacts.

"For the balance of fiscal 2022, we expect strong marketplace demand to exceed available supply. We are optimistic inventory supply availability will improve heading into fiscal 2023 against the backdrop of a very strong brand and healthy pull market across all geographies," the CFO said in the conference call.

J.P. Morgan said in a note it sees Nike's brand momentum across geographies as sustainable and providing insulation to macro volatility and supporting at minimum sustainable, multi-year, high-single-digit top-line growth. "We view this, combined with continued gross margin expansion...driving at least multi-year mid-teens sustainable EPS growth," J.P. Morgan said. The firm rates Nike at Overweight.

"Demand indicators remain strong though, as anticipated, Nike cut FY22 guidance due to production dislocation. Issues are transient and rebalancing supply to meet demand is likely in early FY23, suggesting both opportunity from channel replenishment and a return to the prior expected earning trajectory," Stifel said in a note.

Stifel said it views Nike as a top-tier core holding for large cap growth investors and recommends using any weakness in shares in response to supply challenges as an opportunity to build positions. The firm rates Nike at Buy.

 

Write to Michael Dabaie at michael.dabaie@wsj.com

 

(END) Dow Jones Newswires

September 24, 2021 11:56 ET (15:56 GMT)

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