Nike Inc. (NKE) reports fiscal second-quarter earnings on Thursday, December 18, and at least one analyst thinks the numbers might disappoint more than investors are bracing for.
Telsey Advisory Group analyst Cristina Fernández is projecting a 1.8% sales decline to $12.13 billion, which would be steeper than the consensus forecast of a 1.2% drop to $12.20 billion. The problems are piling up from multiple directions: the company is running fewer promotions, cutting unit shipments to key franchisees, and still dealing with persistent weakness in China.
That said, it's not all gloomy. While U.S. consumers remain what Fernández politely calls "discerning," retailer feedback suggests Nike's new running products have been selling well. There's apparently still appetite for fresh sneakers, even if shoppers are being pickier about what they buy.
Margin Pressure and Earnings Miss
Fernández, who maintains a Market Perform rating and $75 price target on Nike, expects gross margins to compress by 300 basis points to 40.6%. That's actually slightly better than the consensus estimate of 40.4%, but it's still a hefty contraction. Nike had already warned about margin pressure from liquidation activity and tariff impacts, so this shouldn't come as a complete shock.
The analyst is also forecasting earnings of 36 cents per share, a penny below consensus expectations of 37 cents.
One bright spot: Nike likely saw year-over-year traffic growth at its U.S. stores during the Black Friday weekend, suggesting the brand still has pull with American consumers when it matters most.
Shares of Nike were up 2.05% to $64.63 on Wednesday ahead of the earnings report.
