Categories Analysis, Consumer

Nike is all set to report Q3 earnings on March 21. Here’s what to expect

The company is on a restructuring drive focused on cost-cutting measures including headcount reduction

Nike, Inc. (NYSE: NKE) is scheduled to publish third-quarter results next week, amid expectations for a year-over-year decline in profit. The sneaker giant has an impressive track record of innovating its product portfolio, a strategy that helped it navigate through market headwinds.

Stock Dips

After losing momentum ahead of the last earnings report and after the announcement, Nike’s shares have traded below the 52-week average so far. The muted investor sentiment can be attributed to the weak sales outlook, as consumer confidence remained under pressure from inflation and strain on family budgets. The good thing about the recent dip is that NKE has become more affordable, and long-term investors wouldn’t want to miss this opportunity.

When it publishes February quarter results on Thursday, March 21, at 4:15 p.m. ET, the company is expected to post earnings of $0.74 per share, which represents a 6% year-over-year decline. Analysts, on average, are looking for revenues of $12.28 billion.

Digital Push

Reflecting the company’s aggressive push to expand its digital capabilities, Nike Digital had a good Black Friday week this time. Despite the sales slowdown, the positive holiday results show that consumer traffic in physical stores remained stable across markets. Nike banks on its relatively healthy inventory position and brand power to navigate macro uncertainties and the highly promotional environment.

Meanwhile, the management recently announced a workforce reduction that would affect around 2% of employees, as part of a restructuring program aimed at streamlining the business amid continued slowdown in consumer spending. The cost-cutting initiative should allow the company to redeploy resources and invest in its growth areas.

“We have a real opportunity to drive progress across many dimensions of our business, and that’s our priority moving forward. At Nike, we like to say we’re on the offense always. When we see something that needs solving, we don’t wait around, we solve it. And so, as we look to the future, we know where we must focus. Three areas will always drive our distinction and competitive separation: product innovation, storytelling that connects, and marketplace execution,” Nike’s CEO John Donahoe said in a recent interaction with analysts.

Key Numbers

In the second quarter, net income grew around 20% from last year to $1.6 billion or $1.03 per share and topped expectations, marking the second beat in a row. Revenues edged up 1% annually to $13.4 billion as a modest increase in footwear revenues was largely offset by lower apparel sales. The top line also exceeded expectations, after missing in the previous quarter.  

On Friday, the stock opened slightly above the $100 mark and traded lower throughout the session. It has dropped around 6% in the past 30 days.

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