Nike Q2 earnings: ‘cost saving will resonate well with investors’

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on Dec 21, 2023
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  • Nike reports better-than-expected earnings for its fiscal Q2.
  • The footwear company also announced plans of cutting costs.
  • Oppenheimer's Brian Nagel discussed its earnings on CNBC.

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Nike Inc (NYSE: NKE) is down about 5.0% in extended hours even though it reported better-than-expected earnings for its fiscal second quarter.

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Nike to cut costs by about $2.0 billion

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The stock is taking a beating because Nike was not so encouraging about its outlook for revenue in the back half of this year as well.

On Thursday, the athletic footwear company also said it will cut about $2.0 billion in costs over the next three years. Nike Inc plans on realizing those savings via an increased use of automation and streamlining the organisation among other things.

The New York listed firm will then reinvest in its growth and long-term profitability, as per the press release. Nike forecasts pre-tax charges worth up to $450 million related to this restructuring in its current quarter.

Brian Nagel of Oppenheimer is convinced that “cost savings will resonate really well with investors”.

Notable figures in Nike’s Q2 earnings release

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  • Earned $1.58 billion versus the year-ago $1.33 billion
  • Per-share earnings also improved from 85 cents to $1.58
  • Adjusted EPS printed at $1.03 as per the press release
  • Sales popped 1.0% year-over-year to $13.39 billion
  • Consensus was 85 cents a share on $13.43 billion revenue

Nike saw its gross margin improve 170 basis points in its recently concluded quarter to 44.6%.

Another good news for margins is that the Beaverton-headquartered firm is now in a meaningfully better position inventory-wise, as per Oppenheimer’s Nagel, as it suggests that “there’s greater full price through and they’re working past the supply chain disruption”.

China sales came in shy of expectations

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Nike reported $1.86 billion worth of sales out of China in its Q2 versus a higher $1.95 billion that experts had forecast. Its sales in Africa, Europe, and the Middle East also failed to meet Street estimates.  

Digital sales at the Nike brand increased 1.0% on a currency neutral basis in the second quarter. On CNBC’s “Closing Bell: Overtime”, Brian Nagel concluded:

I don’t think the new products that they’ve been teasing are in the numbers. That’s really a 2024 dynamic.

Nike stock is still up over 25% versus its year-to-date low.

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