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Nike earnings preview: Orders canceled and retail partnerships cut but Nike is a ‘winner,’ analysts say

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Nike Inc., like all other apparel and shoe sellers, has been impacted by the coronavirus pandemic; however, analysts say the athletic company will continue to be a “winner” heading into its fiscal first-quarter 2021 earnings announcement, scheduled for after hours Tuesday.

UBS says Nike
NKE,
-1.46%

has canceled a number of orders, which means this quarter will be “ho hum,” but analysts are still bullish.

UBS rates Nike stock buy with a $127 price target.

“The key is Nike proactively canceled pre-COVID-19 factory purchase orders for the fall and holiday seasons by roughly 30% on a unit basis,” wrote analysts led by Jay Sole. “Our checks suggest this has made it hard for Nike to drive high near-term sales growth, despite strong demand. We believe this limits 1Q21 EPS [earnings per share] upside.”

Read: The holiday shopping season could start on 10/10/2020 with retailers hopeful that consumers will turn out early

Susquehanna Financial Group analysts led by Sam Poser note that Nike has also cut its sales to nine retailers, including Zappos, which is owned by Amazon.com Inc.
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-1.78%

 , about 300 Belk stores, about 285 Dillard’s Inc.
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+1.26%

  stores across 29 states and 31 VIM stores across New York and New Jersey.

“Nike’s decision to no longer sell to nine multi-branded wholesale accounts is positive for Nike, as it takes control of more of its own destiny,” Susquehanna said. Analysts there rate Nike stock positive.

Nike has been focused on its own direct-to-consumer offerings. Raymond James analysts note the continued demand for the company’s merchandise, helped in part by the ESPN documentary “The Last Dance,” which sparked even greater interest in Jordan-brand sneakers.

Moreover, Nike continues to invest in its digital channels, with more customers turning to-ecommerce during COVID-19.

“As stores start to reopen, we anticipate digital sales will continue to be robust which will prove critical as anything less than triple digits likely would stand in stark contrast to primary competitors,” Raymond James said.

Also:Customers are lining up to shop at Lululemon and analysts think there’s more room for growth

In the fourth quarter, which ended May 31, digital sales were up 75% with Nike Digital up triple digits in early June.

Raymond James rates Nike stock outperform with a $121 price target.

“All-in, we expect FY1Q shows evidence of progress ahead of plan, ongoing digital transformation, and business evolution to a higher margin, higher return model,” wrote Stifel in a note.

Stifel rates Nike stock buy with a $140 price target.

In its new Stifel Brand Scorecard, analysts note that athletic brands top the rankings, with Nike taking the top spot for “brand score.” Nike, Lululemon Athletica Inc.
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-2.75%

  and Crocs Inc.
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-1.43%

  are analysts “standout winners.”

Here’s what else to watch for when Nike reports:

Earnings: FactSet forecasts earnings per share of 46 cents, down from 86 cents last year.

Estimize, which crowdsources estimates from sell-side and buy-side analysts, hedge-fund managers, executives, academics and others, forecasts EPS of 40 cents.

Revenue: The FactSet consensus is for revenue of $8.94 billion, down from $10.66 billion last year.

Estimize is guiding for revenue of $8.83 billion.

Stock: Nike shares are up nearly 17% for the past three months, outpacing the Dow Jones Industrial Average
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-0.87%

 , which is up 5.7% for the period.

Nike stock has gained 13.5% for the year to date.

Also:COVID-related U.S. e-commerce growth slows as store reopenings attract quarantine-fatigued customers: Adobe

Other items:

-In a back-to-school season that was thrown into disarray due to COVID-19, Stifel’s 2020 Back-to-School Footwear Survey found that Nike was most popular by a wide margin (78%) followed by Adidas AG
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+0.03%

   (16%) and Vans (3%).

Vans is part of the VF Corp.
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-3.29%

  lineup.

-UBS analysts think the next big Nike earnings beat will be in the second half of the fiscal year.

“Our checks in the U.S., Europe and China, plus UBS Evidence Lab indicate Nike is recovering from the first half of CY20 shutdowns and taking market share,” analysts wrote. “However, we think big earnings beats won’t come until the second half of FY21.”

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