Wall Street revaluates Nike’s price target pending results


- Advertisement -

Next Thursday, March 21, Nike B will release its results in reference to the third fiscal quarter of 2024. Wall Street analysts have renewed their price target for Nike B with a positive outlook, despite negative estimates

According to Brand Finance’s 2023 Apparel 50 Annual Report, Nike was named the top sports brand worldwide for the ninth year in a row.

Despite this, Nike recently laid off nearly 1,600 employees, the equivalent of 2% of its entire workforce, and said more layoffs could be forthcoming.

“To compete, we must edit, change and shed less critical work to create greater focus and capacity for what matters most,” Nike CEO John Donahoe wrote in a memo obtained by The Wall Street Journal last month.

He described the layoffs as a ‘painful reality,’ emphasizing the decision’s weight and his personal accountability. He holds himself accountable for the company’s performance of late along with other executives.

In recent times, the company’s revenue growth has not been as expected. In North America, while inventory levels have improved, promotions are still high and retail orders are being placed with caution. As for Europe and China, the market remains volatile. Additionally, there is a feeling in the market that competitor Adidas could dethrone Nike as the most important sports brand and thus affect its share prices directly.

Friend: We need to be faster

In its second-quarter fiscal results conference call on Dec. 21, Nike CFO Matthew Friend hinted that the company was going to make some significant adjustments going forward, with the goal of saving $2 billion in costs over the next fiscal year.

“In this competitive environment, we need to accelerate our pace of innovation, elevate our market experiences, maximize the impact of our storytelling and increase our speed and responsiveness, all in service of the consumer,” Friend said.

Friend also added that Nike is planning reorganization spending of $400 million to $450 million in the second half of the year, primarily in severance, the amount of which will be primarily accounted for in the third quarter.

“We know today that we need to get faster, increase the pace of innovation, increase the pace of the market to the consumer and increase our agility and responsiveness,” Donahoe told analysts. “To drive this, we will adopt a significant savings plan to build investment capacity to drive profitable growth at speed and scale.”

Donahoe also said some areas of potential savings are to simplify the product portfolio, increase automation and technology utilization, streamline the organization and “leverage our scale to achieve greater efficiencies.”

On March 8, Nike entered into an agreement with Bank of America and other financial services companies for a new 364-day unsecured revolving credit facility, initially set at up to $1 billion but with the potential to increase to $1.5 billion, according to a regulatory filing.

This financing is intended to provide working capital and for general corporate purposes

Nike is scheduled to report its third-quarter results on March 21. Analysts estimate a slight decrease in earnings to $0.75 per share from last year’s $0.79, with sales projected at $12.27 billion, down from $12.39 billion.

Last year, the company earned $0.79 per share on sales of $12.39 billion.

Related articles