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Nike Reports Drop In N. America Sale, But Wall Street Still Enthusiastic


03/22/2019


Nike Reports Drop In N. America Sale, But Wall Street Still Enthusiastic
The reporting of the significant drop in revenues from sale in North American region, which was much lower than market expectations, resulted in a fall of 4 per cent in the shares of sports equipment and apparel firm Nike. This first drop in about year for Nike however did not prevent analysts at Wall Street form showing confidence in the company’s new products and growth in its online sale channel.
 
About a year ago, European rivals Adidas and Puma had put the United States based Nike under a lot of pressure. However since then the firm has been able to claw back some of its market share through some aggressive marketing and the launch of its popular Air Max and Jordan sneakers. The company also implemented a strategy of according more focus on women’s wear while also propping up its online business through increased investments.
 
“The athletic footwear cycle and brand power are solid. Nike’s business is strengthening in North America, and we expect the company to continue to recapture the share it has lost to Adidas,” a Jefferies analyst told the media and added that the because of the “high expectations”, the stocks of the company might be slightly down.
 
According to a statement from the company on Thursday, a drop in the demand and slowdown in apparel sales in North America during the quarter was because of a delay in new launches. The quarter saw a severe criticism of Nike on the social media after a Nike sneaker that was worn by Duke University basketball star Zion Williamson simply was torn completely during one of the high-profile matches.
 
Despite these, the stock continued to be is liked by experts and investors on Wall Street. 25 analysts rated the stocks of Nike to be ‘buy’ or higher while just one analyst presented a sell rating on the Nike stock out of a total of 34 brokerages covering the stock.
 
According to Refinitiv IBES data, Nike’s shares trade at 28.6 times the company’s 12-month forward earnings, compared with rival Adidas’ 21.5 times and Under Armour’s 59.5 times.
 
The target price on Nike stocks was lowered by just two amongst all of the brokerage firms - Credit Suisse and UBS. The target price of the stock was cut by $3 by Credit Suisse to $97 even though that number was still well over the median price target of $92.5.
 
The main driver of for the profits of Nike during the reported quarter was accounted for by the online business of the company, including revenues generated from the SNKRS and Nike apps. There was an increase of 36 per cent in the revenue from its online business during the quarter.
 
According to some analysts, higher expenses was a cause of concern for Nike amidst a quarter that was otherwise quite strong, even though most of the analysts were enthusiastic about the results.
 
An increase in selling, general and administrative costs because of wage-related expenses was flagged by Jefferies analyst Randal Konik.
 
(Source:www.bloomberg.com)