Nike eyes record losing streak on China concern, inventory woes
Bloomberg
Nike
The stock slid as much as 2.1% to $100.73 on Tuesday, falling for a ninth straight session in what would be their longest losing streak since the company’s initial public offering in December 1980. The latest drop came after retailer and Nike customer Dick’s Sporting Goods Inc. reported disappointing fiscal second-quarter results and cut its profit outlook for the year, due in part to more theft at its stores.
Nike’s weakness coincides with increasing signs of a soft consumer rebound in China, which is a key growth market for the sports-gear giant. China’s retail sales growth decelerated to 2.5% in July, worse than the median forecast of 4%.
“Investors are waking up to the fact that China’s growth is going to be slower,” said Matt Maley, chief market strategist at Miller Tabak + Co. They’re also realizing that China is not going to do as much as it has in the past to boost growth, he said.
The rout has wiped out nearly $14 billion of Nike’s market value, which currently stands at $154 billion. Even before the recent slump, Nike had failed to keep pace with the advance in the broader market. It’s now down 14% this year, while the S&P 500 Consumer Discretionary Index has surged 29%.
In its most recent quarterly results in late June, Nike reported earnings per share that fell just short of analysts’ expectations, signaling that the company is still working to sell off excess inventory with discounts. Its outlook for the current year also failed to win over Wall Street.
Wedbush analyst Tom Nikic said recent earnings reports from Under ArmourChampionHanesbrands
He anticipates Foot Locker
Nikic has an outperform rating on Nike shares, as do the majority of analysts tracked by Bloomberg. Nike has 25 buy ratings, 11 holds and five sells, and an average analyst price target of $127, which implies about 26% return potential over the next year.
