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Investors Will Be Watching Inventory Levels When Nike Reports Q1 Earnings

Investors Will Be Watching Inventory Levels When Nike Reports Q1 Earnings

Ahead of Nike Inc (NYSE: NKE)'s fiscal first-quarter results due on September 27, Wells Fargo raised a red flag concerning inventory levels. Given the elevated inventory levels in Europe and Asia in the previous quarter, the firm noted that the company's ability to navigate the current environment is the key.

The firm's senior analyst Ike Boruchow noted that traffic trends have improved in early September following a dismal start to the back-to-school season. However, the analyst sees risk from warmer weather for the next few weeks — a development unfavorable for the company.

In anticipation of a guidance cut, premised on competitive threat, sentiment toward the stock is weak. However, Wells Fargo believes the company could clear the lowered bar for the first quarter, given the sales lift from the Olympics and a conservative margin guidance. The firm also believes the guidance for the fiscal year is safe now.

Related Link: Nike Continues To Build A Moat Around Its Brand

Although the firm believes Nike's stock will trade up following the results announcement, towing in line with the trend in the previous three first quarters, the company said the stock could suffer if forex futures growth continues to deteriorate and if inventory levels remain elevated.

Concluding, Wells Fargo said the gross margin outlook for the remainder of the year will largely hinge on Nike's ability to rein in inventory growth overseas.

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Latest Ratings for NKE

Apr 2019ReinstatesBuy
Mar 2019MaintainsMarket PerformMarket Perform
Mar 2019MaintainsNeutralNeutral

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