Nike Sees Strong Demand, But Supply Hurdles Hurt Guidance: Analyst

Nike Inc NKE reported mixed results for the first fiscal quarter of 2022, with earnings ahead of the consensus estimates on revenues that missed expectations, according to BofA Securities.

The Nike Analyst: Lorraine Hutchinson reiterated a Neutral rating for Nike with a $160 price target.

The Nike Takeaways: The company’s earnings beat was driven by higher-than-anticipated gross margins, driven by full price selling and a shift online, and a lower-than-expected tax rate, Hutchinson said in the note to clients.

“Despite robust consumer demand, mgmt lowered F22 sales guidance to +MSD vs +LDD previously, solely due to supply chain headwinds,” the analyst wrote. “Nike lost 10 weeks of production from factory shutdowns in Vietnam and transit times to the US have doubled from 40 to 80 days,” she added.

“We continue to see demand risk from brand issues in China, which will now be exacerbated by supply chain delays,” Hutchinson stated. She lowered the earnings estimates for fiscal 2022 and fiscal 2023 from $4.24 per share to $3.51 per share and from $4.83 per share to $4.52 per share, respectively.

NKE Price Action: Shares of Nike were down 6.1% at $149.71 midday Friday.