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Updated: Nike Earnings in the Face of NFL and Rivals

Nike (NKE)
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Learnbonds discusses Nike (NYSE:NKE), as well as its earnings and challenges. The sporting brand reports on its April to June performance today. Investors will be eager to learn about its future prospects, too, and about strategies against existing industry hurdles.

However, we cannot touch the U.S. sporting scene without acknowledging President Donald Trump’s sentiments. The reaction from his NFL attack is still unfolding. Will Trump become a formidable influence in the U.S. sporting scene, and how do major brands feel about this?

Trump made at least three tweets on the NFL issue on Tuesday. They come two days after the weekend he condemned NFL sports players for kneeling during the national anthem. It is an odd topic to press on. especially in the face of other, greater and more imminent issues. Tax reform, the retraction of the Affordable Care Act, and several other problems are on headlines alongside the president’s disgruntlement with the NFL. With a sporting brand giant now in the spotlight, analyst are curious about Trump’s effect on Nike.

Should Nike and other sporting giants be concerned about Trump? Bloomberg extends this question to Jefferies analyst Randy Konik. He was asked if there are any upsides or a downsides with incidents of this nature?

Nike (NKE)

Konik said no. Consumers vote with their wallets for the fashion and clothing brands they like. Sports fans are not going to view politics as a huge impact on their favorite sports brands. Similarly, Konik went on to say that the likes of Nike are not concerned with the NFL incident either. The high-end clothing scene is mostly about being fashionable and trendy. Where the businesses of Nike and rivals like Adidas are concerned, it is all about the best product and the best look for those products. That, and which brand is doing a well with its sponsorship and distribution channels.

Konik stands by his statements, but there is a clear impact that social-political views have on fans. What is interesting to consider is the buying trends of sports fans as they side with their favorite sporting figures. The Jerseys of certain NFL players have seen more demand as they take sidelines or kneel despite Trump’ s call for a sense of unity within the NFL. Konik was asked if the likes of Nike sees this an opportunity or not.

The bottom like with these sponsorships, Konik said, is that the teams that are doing well will have the best-selling jerseys. The analyst brings up the incident of the NFL Pittsburgh Steelers player. Even though his jersey is selling better now, perhaps due to reactions from the weekend, reactions of that nature are not significant to sporting brands like Nike one way or the other.

Nike earnings

Moving onto today’s performance reveal, Nike shares has been hammered somewhat. Nike shares have climbed around 5 percent this year, but have fallen about 2 percent over the past 12 months. Earnings estimates are also down some 20 percent. Revenue is not expected to have an impressive increase either. In fact, The Street anticipates a zero percent increase in revenues for the last quarter.

Konik said Jefferies focuses on overall sales and changes in buying traits. Jefferies research suggests that competitors like Adidas are gaining a lot of market share against Nike. That is the biggest risk factor according to Konik. And it is not just for the quarter but for the foreseeable future, too. This will prove to be a significant pressure point for Nike over the next year or two. Adidas’ plus revenue is $3 billion in North American, whereas Nike’s is $15 billion. Bearing that, is easy see to how Adidas is able to stand up against Nike, said Konik.

Another point to look at is the big jump in the dollar’s value. The Jefferies analyst was asked if this should be a concern for Nike, considering that the bulk of its sales stems from North American buyers. What is the lag time between earnings and the dollar’s index?

Konik gives it about a year or so from an FX point of view. One good thing about Nike is that it has already hedged out its dollar risk exposure. The company has already met the foreign currency impact on its business for the next year or so. Konik says there will not be a significant impact for the next 12 months or so. It is not just for the U.S. dollar either, but the fluctuation or most major currencies. The real impact on Nike’s bottom line is market share shifts and mark-downs.

Nike is set to reveal its earnings today around 4pm eastern time.

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Mvusi Ngubane

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