Nike Inc. stock fell 6.1% on Friday after the sporting goods giant revised its forecast in light of manufacturing shutdowns in Vietnam, as well as other supply chain issues rocking the market. Most categories of consumers.
“We now expect FY2022 single-digit revenue growth over the previous year, compared to our earlier forecast of weak double-digit growth, solely due to channel impacts. procurement that I just described, â€said Matthew Friend, CFO. officer at Nike NKE,
when calling fiscal first quarter results Thursday, according to FactSet.
“Specifically for the second quarter, we expect stable or below single digit revenue growth from the prior year as plant closures impacted production and delivery times for the holidays and spring. Lost weeks of production combined with longer transit times will lead to short-term inventory shortages in the market in the coming quarters. We expect all geographies to be affected by these factors. However, geographies in Asia with less inventory in transit at the end of the quarter will be disproportionately impacted from the second quarter. “
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Consensus FactSet predicts second-quarter revenue of $ 11.528 billion, suggesting a 2.5% increase. The consensus for FactSet’s revenue for the full year is $ 48.167 billion, which implies a gain of 8.1%.
Nike factories in Vietnam have been closed since July and reopening is expected in early October. Nike says it will take “several months” for production to reach capacity.
“While some uncertainty remains as to how long it will take to resolve supply chain issues and whether Nike’s sales growth rate in China accelerates, we believe investors
sentiment will improve now that Nike has quantified the Vietnam plant shutdown
impact, â€UBS analysts wrote in a note.
UBS is pricing Nike shares to buy with a price target of $ 185.
And: Buy early and expect to pay more: Supply chain issues could be a stumbling block for optimistic holiday shopping forecasts
“The problems are transient and a rebalancing of supply to meet demand is likely at the start of FY 23, suggesting both an opportunity for channel replenishment and a return to the old
expected revenue path, â€Stifel analysts wrote.
“We remain constrained by the transformation of the company towards a higher margin, more
return business model. As a result, we continue to view Nike as a leading base position for large cap growth investors and recommend using any equity weakness in response to supply challenges as an opportunity to build positions. “
Stifel evaluates buying Nike shares with a target price of $ 213.
Not all analysts are so confident.
Since factories in southern Vietnam have yet to reopen, we think the single-digit forecast may turn out to be overly optimistic, especially since Nike has echoed our view that it should time for factories to regain full capacity (Indonesia has reopened, but is still not producing at full capacity) and as such, visibility is practically zero, “wrote BTIG analysts led by Camilo Lyon. BTIG highlighted his demotion of Nike shares to neutral earlier this month due to the COVID-19 pandemic in Vietnam.
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In addition, worsening bottlenecks along the supply chain (port congestion, shortage of containers, limited maritime and air availability) have doubled maritime transit times to 80 days, further exacerbating a already poor supply situation. “
Nike stock is up 5.9% for the year to date while the Dow Jones Industrial Average DJIA,
grew by 13.7% over the period.
