Are stores getting more desperate to sell sneakers? Fourth-quarter results from Nike Inc. on Thursday will probably provide part of the answer.

Even as its some of its basketball shoes still put up double-digit sales gains — like those named after NBA icons LeBron James, Luka Doncic and Giannis Antetokounmpo — the athletic-gear maker, like its rivals, has faced weaker consumer demand overall. With customers forced to spend more money on necessities over the past year, they’ve had less to spend on new shoes.

In March, Nike
executives said that the demand backdrop remained “promotional” — one in which anyone selling sneakers and clothing was cutting prices more aggressively to attract customers. But ahead of Thursday’s results, some analysts also wondered whether the stalling demand has forced bigger changes to the way management thinks about its broader turn away from retailers — a core piece of its sales strategy.

Nike over recent years has embarked on a plan to rely less on shoe retailers for sales and more on sales made directly to customers through its own stores and online. But recently, it decided to start selling clothing again at Macy’s
and shoes again at DSW, the shoe-store chain run by Designer Brands Inc.
— this after ending partnerships with both retailers over the past two years.

The return to traditional retail has raised questions about whether Nike is looking to more aggressively clear product it’s had trouble selling, and whether management is re-evaluating the company’s go-it-alone sales strategy overall.

See also  Sydney firefighters working to extinguish building fire after ‘apocalyptic’ Surry Hills blaze | Australia news

“The big question on our minds heading into [Nike’s] quarter is what is going on with the [direct-to-consumer] pivot?” Quo Vadis analyst John Zolidis said in a note on Monday. “Reopening Macy’s and DSW seems odd in context of previous dismissive statements about undifferentiated retail.”

He continued: “Further, neither of these retailers has a customer that correlates strongly with [Nike’s] highest-value segments. The easiest explanation is that [Nike] overestimated the dollars it could recapture from closed wholesale accounts and now has too much inventory it needs to clear.”

What to expect

Earnings: Analysts polled by FactSet expect Nike to earn 68 cents a share, down from 90 cents in the same quarter a year ago. Contributors to Estimize — a crowdsourcing platform that gathers estimates from Wall Street analysts as well as buy-side analysts, fund managers, company executives, academics and others — expect earnings per share of 75 cents.

Revenue: Analysts polled by FactSet expect $12.58 billion in sales for Nike. Forecasts from Estimize call for sales of $12.72 billion.

Stock price: Nike’s stock is only up 1.3% over the past 12 months. Shares got hit in September, after company executives warned of further price-cutting from rivals due to weaker demand. The stock rebounded later but gave up some gains in May. The stock was up 2% on Monday.

See also  Biden’s Marijuana Pardon Will Drive Crime Higher

What analysts are saying

Nike in March said demand for product sold at full pricing remained solid. Still, sneaker chain Foot Locker Inc.
recently cut its outlook. Lots of Vans shoes are running at a discount, one analyst said last month, as the skater-centric brand competes with casual fare from the likes of Adidas
and others.

Other analysts were also wondering about Nike’s return to Macy’s and DSW. But not everyone believed the move was a sign of deeper problems.

“Investors are worried that this is a reversal in Nike’s shift from wholesale to [direct-to-consumer], but we don’t think the strategy is broken,” BofA analyst Lorraine Hutchinson said in a research note on Wednesday. “We expect to hear an explanation of these moves on the [conference] call rather than an about-face on its focus on reducing undifferentiated wholesale.”

Still, the company faced concerns about sales abroad. Zolidis also said markets were increasingly worried about growth in China, whose recovery from pandemic lockdowns has stumbled.

“Our recent conversations with companies in China suggest that trends are mixed,” Zolidis said. “The consumer is more value oriented, and job uncertainty is higher.”

Source link

(This article is generated through the syndicated feed sources, Financetin doesn’t own any part of this article)

Leave a Reply

Your email address will not be published. Required fields are marked *