Shares of
Nike
and its peers rose on Friday after the athletics-gear company’s earnings relieved concerns about discounting. It’s a much-needed boost for Nike and the sportswear sector overall.
Nike
(ticker: NKE) stock was up 7.9% at $96.70 in premarket trading on Friday after giving better-than-expected guidance alongside its first-quarter earnings. The stock had been down 23% this year so far as of Thursday’s close as the company struggled with concerns over a slowdown in China and elevated inventory. The report came after the bell.
“A big sigh of relief will be the likely investor reaction,” wrote
Jefferies
analyst James Grzinic. He said key positives were Nike’s falling inventory and maintained guidance for growth in sales and an improved gross margin.
“Other interesting flags include a call-out around a ‘highly promotional’ Chinese environment which did not prevent an improvement in full price sales,” Grzinic said.
Jefferies has a Hold rating and $100 target price on Nike stock. Nike was a Barron’s stock pick earlier this year.
The whole athletic-gear sector lifted after the results. In premarket trading on Friday, On Holding (ONON) was up 6.7%,
Foot Locker
(FL) rose 3.0%, and
Under Armour
(UA) rose 1.3%. In after-hours trading on Thursday,
Skechers USA
(SKX) was up 0.5% and
Dicks Sporting Goods
(DKS) rose 1.7%.
Nike’s European rivals Adidas (ADS.Germany) and
Puma
(PUM.Germany) climbed 5.8% and 5.5%, respectively.
While analysts acknowledged Nike’s outlook offered some relief against a tough backdrop, they aren’t betting on the rally to continue.
“Recovery in the back half remains intact, for now, though growth in North
America is likely to remain challenged as we lapse two strong quarters of growth from 2Q/3Q 2023. Additionally, we believe that Greater China improvements are to remain muted in the near term due to ongoing foreign exchange headwinds,” KeyBanc analyst Ashley Owens wrote.
Owens kept a Sector Weight rating on the stock without a price target.
Seaport Research analyst Mitch Kummetz kept a Neutral rating on the stock with no price target, arguing the company still looks to be losing market share in running shoes to HOKA –owned by
Deckers Outdoor
(DECK)– and privately owned New Balance.
Write to Adam Clark at [email protected]
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