Nike Doesn't Get Affected By Retail Turmoil, Expect Healthy Results In Q3

Nike Inc NKE is scheduled to report its FQ3 2017 results on March 21. The company will likely report healthy, broadly in-line results, amid the challenging U.S. wholesale trends, DA Davidson’s Andrew Burns said in a report.

Burns maintained a Buy rating on the company, with a price target of $64. He estimated Nike’s FQ3 revenue and EPS at $8.464 billion and $0.52, versus consensus expectations of $8.464 billion and $0.53, respectively.

Guidance To Be Intact

“We expect full-year guidance calling for high single-digit reported revenue growth (high single to low double-digit growth in c.c.), gross margin contraction, SG&A growth in the low to mid-single-digit range, and a 17% tax rate will be mostly reiterated,” Burns wrote.

Related Link: 5 Upcoming Catalysts For Nike Bulls

Nike would be able to preserve its earnings power by offsetting any incremental pressures from the weak and promotional US retail environment by SG&A discipline. The analyst expects the “increasingly dislocated” Futures orders growth to be +3 percent, short of the projected revenue growth, due to Nike’s evolving DTC [direct to consumer] business model and “efforts to adjust retail inventory levels to maintain a pull market.”

With the tough U.S. brick and mortar retail environment weighing on wholesale trends, healthy DTC trends support “our positive view on brand momentum,” Burns commented.