Investors to Watch How Nike's Cutbacks Impact Outlook -- Earnings Preview

By Sara Germano 

Nike Inc. is scheduled to report its fiscal fourth-quarter earnings after the market closes on Thursday. Here's what you need to know:

EARNINGS FORECAST: Analysts polled by FactSet expect Nike to report net income of $844 million, or 50 cents a share, compared with $846 million, or 49 cents a share, a year ago.

REVENUE FORECAST: Analysts are expecting $8.6 billion in quarterly sales, compared with $8.2 billion last year.

WHAT TO WATCH:

IT'S THE SHOES: While the fourth quarter typically isn't Nike's biggest in terms of revenue, the company often provides details on strategy and category-specific revenue, such as those for running, basketball and the Jordan brand. Those metrics may give investors clues as to what sneaker might dethrone Adidas AG's Stan Smiths. Foot Locker Inc. CEO Dick Johnson noted last spring that the white tennis shoe trend, which made Adidas a hot property, was cooling off. A successor, if Nike and its marketing machine have their way, is its new Air VaporMax.

AMAZON: After holding out for years, Nike has agreed to sell some of its products through Amazon.com Inc., a deal that underscores the online retailer's increasing power to lure brands to its site. What isn't yet clear is what Nike goods will appear there. The swoosh has long been adept at developing and selling different product lines to different retailers, so that Foot Locker and Kohl's Corp., for example, don't carry the same items. Analysts are likely to seek more information on Nike's strategy as it collaborates with Amazon.

DOWNSIZING: In a rare, pre-earnings release earlier this month, Nike said it would cut 2% of its workforce -- more than 1,000 jobs -- as well as 25% of the products it makes, efforts to stave off slumping sales. Data from industry tracker NPD Group show Nike's U.S. retail market share for athletic footwear has dropped by 1 percentage point to 50% this year through May, while rival Adidas's share rose to 11% over the same period. How will Nike's cutbacks affect its outlook for the coming fiscal year, especially considering it is aiming for $50 billion in revenue by 2020?

ORDERS AND INVENTORY: Nike has tweaked its reporting metrics, taking a closely watched one known as futures orders, or wholesale orders scheduled to ship in the next six months, off its earnings release. It now typically discusses them during its call with analysts, a move it says is tied to its lessening reliance on the wholesale business. In a research report earlier this month, Stifel analyst Jim Duffy predicted that Nike's inventory growth rates will fall to 3.9%, from 7.5% in the previous quarter.

Write to Sara Germano at [e-mail]

(END) Dow Jones Newswires

June 28, 2017 17:42 ET (21:42 GMT)

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