Nike Inc. (NKE) – Get the Class B report from NIKE, Inc. Shares jumped on Tuesday after Goldman Sachs analysts began hedging the sportswear giant with a “buy” rating and a price target of $172.
Goldman analyst Kate McShane said the group’s current supply issues are “transient”, noting the stock’s recent pullback after the third-quarter earnings update represents a buying opportunity. based on a “sound industrial context with a continued, company-specific focus on innovation to drive growth.”
Nike cut its full-year sales forecast last month to a “mid-single-digit” growth rate, from a previous estimate of double-digit gains, due to chain issues. supplies that she said were affecting the movement of goods from Asia to North America. .
Over the summer, two Nike suppliers in Vietnam, where about half of its footwear and a third of its apparel are produced, planned production cuts to meet COVID requirements amid a surge in Delta infections in the South Asian region.
“Several of our partner factories in Vietnam and Indonesia had to abruptly cease operations in the first quarter,” Nike chief financial officer Matthew Friend told investors Sept. 23. “As of today, Indonesia is now fully operational, but in Vietnam almost all shoe factories remain closed by government mandate.”
“Our experience with COVID-related plant closures suggests that reopening and returning to full-scale production will take time,” he added.
Shares of Nike rose 0.8% late Tuesday morning to change hands at $151.45 apiece, a move that would extend the stock’s year-to-date gain to around 8%.
Bank of America analyst Lorraine Hutchinson, however, recently noted that the supply chain issues are “not unique to Nike and we expect delivery delays across the sports ecosystem.”
Nike’s earnings for the three months ending August, its first fiscal quarter, were pegged at $1.16 per share, up 22.1% from the same period last year and just ahead of Street consensus forecast of $1.11 per share. Group revenue, Nike said, rose 16% to $12.2 billion, just below analysts’ estimates of $12.465 billion.
Sales in China rose 11% from a year ago to $1.982 billion, Nike said, while sales in North America, Nike’s biggest market, rose 15% to $4.879 billion.
Gross profit margins increased 170 basis points to 46.5%, “driven by margin expansion in our NIKE Direct business, a higher combination of full-price sales and favorable exchange rate movements” .