After a challenging period marked by shifting consumer behaviors and supply chain disruptions, the sportswear industry is witnessing a resurgence in demand, offering a glimpse of optimism for major players. This renewed momentum sets the stage for a closer examination of Nike, Inc.'s (NYSE:NKE) recent financial performance and strategic decisions.
B Of A Securities analyst Lorraine Hutchinson maintained a Buy rating on Nike with a price forecast of $84.00 following its first-quarter earnings release last week.
In September, Nike reported first-quarter revenue of $11.72 billion, beating analyst estimates of $11 billion and earnings of 49 cents per share, beating analyst estimates of 27 cents per share.
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The analyst says that the first-quarter sales recovery strengthens confidence in the ongoing turnaround.
Hutchison noted that apparel units rose 10%, with increases of 16% in North America, 8% in Europe, Middle East, & Africa (EMEA), and 10% in Asia Pacific & Latin America (APLA).
Meanwhile, footwear units grew 2%, with growth of 5%, 4%, and 5% in North America, EMEA, and APLA, respectively.
The analyst states that growth was driven by expanded distribution and stronger value-channel sell-in. The only weak spot was Greater China, where footwear and apparel units fell 11% and 2%, respectively.
Hutchison notes that gross margin fell 320 basis points to 42.2% in the first quarter and expects margin pressure to ease in the second half, as comparisons against last year's wholesale support actions will help offset ongoing tariff impacts and volatility in China and Converse.
The analyst further says that inventory in Greater China decreased by 11%, although closeout inventory remains elevated, and APLA increased by 9%, necessitating additional measures to rebalance stock.
Talking about Nike's decision to reduce its share buybacks and temporarily pause the program, the analyst believes this is likely to conserve cash amid lower earnings.
Investors can gain exposure to Nike stock via VanEck ETF Trust VanEck Morningstar Wide Moat Value ETF (BATS:MVAL) and Invesco Dow Jones Industrial Average Dividend ETF (NYSE:DJD).
NKE Price Action: Nike, Inc. shares were down 0.53% at $71.55 at the time of publication on Monday. The stock is trading within its 52-week range of $52.28 to $84.76, according to Polygon data.
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