Nike’s Golf Status and Wholesale Business Will Be In the Spotlight When It Reports Q2 Earnings Next Week

Analysts are projecting an overall positive quarter for Nike Inc. ahead of the Swoosh’s second-quarter earnings report next week.

Most market watchers said signs look good for the sneaker giant, but some noted potential headwinds.

In a late November note to investors, Jefferies analyst Randal Konik said that Foot Locker’s third-quarter sales beat was a good indicator for how Nike’s results might turn out. Nike still remains the top brand at Foot Locker, though brand mix diversity outside of Nike increased to 36 percent of sales in Q3, from 32 percent this time last year. Foot Locker also touted its partnership with Nike and noted strong sell-through of its Nike and Jordan models.

“We believe Nike’s products continued to supplement the Foot Locker banner’s growth as management noted, preferring it for key launches and constraining supply during this reset period,” Konik wrote. He added that given Foot Locker’s overall Q3 growth and strong Thanksgiving week period, “we believe Nike could witness a positive impact to performance.”

Similarly, UBS analyst Jay Sole wrote in a Dec. 6 note that his “read of Nike’s wholesale partners, manufacturing partners and competitors suggest Nike performed slightly better than expected during Q2,” calling out strong performers like Chinese retailer Pou Sheng and Dick’s Sporting Goods.

In a Dec. 8 note offering a positive rating for Nike, Jane Hali & Associates analyst Jessica Ramirez highlighted Nike’s strong wholesale alliances with retailers like JD Sports and Dick’s Sporting Goods. She also explained how Nike reentering into wholesale partnerships with Macy’s and Designer Brands can help it clear through excess inventory.

“Nike has stated it has taken proactive decisions to restrain inventory supply and prioritize marketplace health, particularly in North America,” Ramirez noted.

However, some analysts were also cautious about certain developments that could be an issue for Nike this quarter.

Earlier this week, the “No Laying Up” golf podcast reported that the PNC Championship, a major golf tournament, could mark the last time that Tiger Woods is represented as a Nike athlete. The podcast also hinted at a similar situation among other Nike golf athletes — among whom are stars such as Rory McIlroy, Scottie Scheffler and Brooks Koepka — and said that there could be a potential apparel brand launch in the works from a golf equipment manufacturer.

In a Monday note to investors, Williams Trading analyst Sam Poser called out reports that Nike “may be planning to license out its entire golf business” and part ways with Woods, Mcilroy, Scheffler and Koepka, and said such changes would “likely remove Nike’s presence in golf and will do long-term damage to the brand.”

Nike also appears to have undergone recent layoffs. In November, some Nike employees took to LinkedIn to share that they have been laid off from the company as the Swoosh unveils major C-suite changes across design and marketing. According to the posts, the cuts occurred across talent and product management teams, as well as in contracted roles like copywriting. Nike did not return FN’s request for comment for this story in November.

As for China, a consistently hot issue for Nike, analysts will be looking once more for signs of recovery in the region.

“We are more guarded on China sportswear growth into next year and expect a slower run-rate contribution from China vs. pre-pandemic levels,” wrote Goldman Sachs analyst Brooke Roach in a Dec. 4 note. “That said, we see opportunity for business optimization to drive healthier margins in the region, with China still contributing to sales and EPS growth in aggregate.”

Stifel analyst Jim Duffy also expressed caution on Nike’s China outlook.

“Big picture, while we continue to view the long-term brand opportunity favorably, [the] likelihood of enduring consumer macro weakness keeps us conservative on China growth prospects and the contribution to the multi-year growth algorithm,” Duffy said in a note to investors this week.