Nike Inc. is scheduled to report fiscal second-quarter results on Monday after the closing bell, and while some analysts say the manufacturing shutdowns in Vietnam that hurt the company earlier this year are largely in the past, recovery in China has become a focus.
Nike
NKE,
announced a downward revision of its guidance during the last earnings announcement in light of the disruption in Vietnam, which began in July. Even with facilities back up and running, it would take time for production to reach capacity, the company said at the time.
“[W]e do not believe Nike will raise its FY22 guidance much,” wrote UBS analysts in a preview note.
“On one hand, Vietnam factories likely opened sooner than what Nike assumed in its guidance and favorable pricing trends suggest potential gross margin upside. On the other hand, a slow recovery in China, ongoing supply chain cost pressures, Omicron-related European lockdowns, and FX headwinds likely limit how much Nike can raise its guidance.”
UBS rates Nike stock a buy with a $185 price target.
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Even with the Vietnam shutdowns accounted for, Baird analysts are preparing for some continued impact.
“We think downside risk tied to supply chain/logistics was captured in the September F2022E guidance cut especially with Vietnam successfully reopening (footwear exports +8% year-over-year 2Hof November) and global transit times not getting worse,” Jonathan Komp wrote.
“Still, we think supply chain becomes a greater drag than in FQ2, suggesting some risk Nike could point to FQ3undefined
