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

Nike Inc (NYSE: 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.