Key points:
- For Q3, Nike reported an EPS of $0.87 per share and revenue of $10.87B, topping estimates
- Amid global uncertainty and consumer backlash in China, Nike are holding off on a FY outlook
- What does this mean for other retailers? Will we see a lot more extra-cautious earnings?
Earnings reports are critical for not only understanding current performance but highlighting management outlook for the rest of the fiscal year. Investors normally swoon over ambitious projections, whereas a hint of financial ambiguity welcomes sellers back to the market. Nike (NYSE: NKE) reported Q3 earnings yesterday, and although the popular fashion retailer beat on both revenue and EPS, the company failed to give an outlook for the rest of the year; arguably understandable in the current economic environment.
Shares of Nike stock rose around 6% in pre-market trading this morning, thanks to topping analyst estimates on both ends due to consistently impressive demand in North America. At a time when market sentiment rests on the insecurity driven by overseas conflict, inflation, and supply chain issues, the retailer made a bold and rare move to withhold a fiscal year projection.
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Whilst this might have disappointed some investors, it means Nike can’t set itself up to fall. By withholding an outlook on the grounds of uncertainty, Nike isn’t massively exposed to any shortcomings as a result of the difficult climate. As made clear by Nike CFO Matthew Friend:
“We are focused on what we can control…There are several new dynamics creating higher levels of volatility.”
Chinese market challenges haven’t proved as big of an issue as expected. During inventory shortages over the pandemic, Nike favored North America over China; and it paid off with sales climbing 9%. Nike also reported Q3 income of $0.87 per share compared to $0.90 per share the previous year. Whilst a slight dip may have been expected, income still topped analyst expectations of $0.71 per share. Sales also beat the consensus, coming in at $10.87B compared to estimates of $10.59.
Nike’s earnings will act as a vivid indicator of how retailers are managing the current global climate. A lack of fiscal outlook could be a common feature of company earnings moving forward, especially those with a sizeable global footprint.