Nike wants to overcome short-term shipping problems, most analysts say

(Reuters) – The supply chain hiccups that hampered Nike Inc’s third-quarter sales are mostly behind them, analysts said on Friday, after executives said the sporting goods giant adjusted stocks and other areas to prevent a recurrence.

Nike missed analysts’ expectations for quarterly sales on Thursday, amid global container shortages and congestion at west coast ports, as well as physical store closures due to lockdowns in Europe.

Nike forecasted “low to mid-teens” year revenue growth, just short of heightened expectations of a 15.9% increase. Shares of the Oregon-based company fell nearly 3% when trading began.

Still, Nike executives said the supply problem, which has largely affected car, clothing and fitness equipment manufacturers, is mainly behind them, adding that they now expect a “flow.” more consistent inventory, ”an explanation that most analysts find plausible.

“While it’s reasonable to leave some flexibility amid COVID disruptions and delays at US ports, we believe the forecast will prove to be ultra-conservative in several areas,” Credit Suisse analyst Michael Binetti said. in a research note.

At least four brokerages have raised their share price targets, with Credit Suisse raising it to $ 176 from a median of $ 165.

“We have now effectively absorbed the longer lead times in our third quarter,” CEO John Donahoe said on a post earnings call, adding that the company expected “more consistent inventory flow in the fourth quarter. quarter, acknowledging that transit times are high compared to the previous year. “

Nike executives added that inventory levels in North America were now better managed to meet increased demand and allow more sales at full price.

“With managing bottlenecks, strong brand health, higher margin digital resonance and China outperforming, momentum is healthy,” said Kate Fitzsimons of RBC Capital Markets.

The company’s revenue from online sales rose 59% in the third quarter, while revenue from Greater China increased 42%.

Nike shares have more than doubled in the past 12 months, helped by increased demand for athletic wear from people confined to their homes.