NIKE: Color on Quarter (58.01)
- Wedbush notes NKE reported mixed results with headwinds in North America (NA) and f/x still pressuring sales and margins. They still believe futures are an important directional indicator to the story and these declined 1% currency neutral (CN) or -4% reported. While the company is making progress on accelerating its innovation pipeline and engagement with consumers, this is more than offset in the medium-term by weakness in other areas of the business and the retail backdrop in NA (reflective of the 9% futures decline in the region). They still contend that other brands continue to be in the sweet spot of what consumers currently demand, particularly on a wholesale level, and they don't see that changing in the near future.
- Stifel cuts tgt to $66 from $68. FY3Q results highlight Nike's global diversification and financial flexibility and the FY18 outlook points to largely sound fundamentals with revenue growth in all regions, operating margin expansion, and constant currency EPS growth in line with long-run objectives (mid-teens). Unfortunately, North America remains a challenge and FX pressures to earnings are projected to stiffen in FY18, masking expectations for constant currency progress in reported EPS. Their FY18 and FY19 estimates come in though they continue to view Nike as well-positioned to succeed long-term, and look beyond FX pressures in FY18 to FY19 earnings power as a basis for valuation.
- TAG ntoes Nike's report was mixed. The quarter itself was fine with an in line sales result, while a weaker-than-expected gross margin was more than offset by well-managed SG&A. However, futures came in a little light (due in part to some timing-related issues for China futures) and the co noted that the promotional environment in North America is worse than they expected it to be relative to 90 days ago. In addition, F/X sounds like it will be a greater headwind in FY18. However, there are also several positives here that show that their thesis is playing out: 1) better results in basketball (Nike cited market share gains vs. losses LY); 2) actual results outpacing last quarter's futures by ~500 bps, up from ~100 bps last quarter; 3) progress in North America (CC sales accelerated on a two-year basis, margins were higher, and inventory was down 8%); and 4) a strong plan dubbed the "triple-double," that will essentially 2x innovation, speed, and direct. While the path continues to be choppy, they believe Nike is gaining traction and heading in the right direction, which should drive better operating results and stock price performance.
- FBR & Co likes Nike's innovation pipeline, int'l runway, and LT margin catalysts, but they remain on the sidelines and look for improved rev growth, margin execution, and lower inventory growth.