Nike (NKE) is scheduled to report results of its third fiscal quarter after the market close on Thursday, March 22, with a conference call scheduled for 5:00 pm ET. What to watch for: 1. GUIDANCE: Along with its last report, Nike guided for Q3 revenue growth at or slightly below Q2's growth, against analysts' consensus at the time of $8.98B. Nike backed its FY18 revenue growth view of mid single digit range. Analysts at the time expected Nike to report FY18 revenue of $35.79B. BofA/Merrill Lynch analyst Robert Ohmes says that any potential EPS upside for the quarter will likely be offset by below-consensus guidance for Q4, as its current FY18 guidance of revenue growing at mid-single-digit pace is reliant on World Cup-related acceleration in revenue. Credit Suisse analyst Michael Binetti believes that revenue growth bottomed in Q1 and should accelerate to high single digits by FY19 driven by international sales from the start of World Cup, diminishing U.S. quality of sales headwinds, innovation in Running products, and improved Basketball segment sell-through. 2. CONSUMER DIRECT OFFENSE: Last year, Nike announced the "Consumer Direct Offense," a new alignment that "allows Nike to better serve the consumer personally." As part of the new alignment, the company will "deeply" serve customers in 12 key cities, namely New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul, and Milan. Nike has said that the changes will result in an overall reduction of roughly 2% of its global workforce. 3. PARTNERSHIPS: Nike has started selling shoes directly on Amazon (AMZN) through a new brand registry that prevents counterfeits, and said the test is "going well" and that it expected the pilot to be extended. In December, Nike said its partnership with the NBA was "already energizing" its apparel business. Nike also said it would test selling through Stitch Fix (SFIX) in early 2018. 4. INCREASED COMPETITION AND PROMOTIONAL ACTIVITY: Nike is under pressure from competitors including traditional players Under Armour (UA, UAA) and adidas (ADDYY), as well as Amazon, which now has private-label sportswear available on its site. Jefferies analyst Randal Konik said Nike "needs" Foot Locker (FL) as part of its plan to curtail wholesale distribution and his recent proprietary data shows Nike share losses are reversing, which is positive for the retailer. Konik said in December that adidas was gaining share from Nike in running, and in basketball, while Nike continues to dominate, the recent launch of the Curry 4 is putting Under Armour "back on the map." 5.EXECUTIVE NEWS: Trevor Edwards, the Nike brand president who was seen as a potential successor to CEO Mark Parker, stepped down in March and will retire from the company in August. In an internal memo to staff announcing the departure, Parker disclosed that the company has recently received reports of "behavior occurring within our organization that do not reflect our core values of inclusivity, respect and empowerment." Parker wrote, "We've heard from strong and courageous employees," but did not specify the nature of the complaints or whether they involved Edwards or other executives. Jayme Martin, a vice president and general manager of global categories for Nike, was forced out of the company in the wake of complaints about inappropriate workplace behavior. Meanwhile, Parker will remain as chairman, president and CEO beyond 2020 and Elliott Hill, former president of Nike Geographies, will take on the new role as president of consumer and marketplace. Michael Spillane will continue to lead all categories, design, product and merchandising. Wedbush analyst Christopher Svezia noted that media reports suggest that Edwards' departure may be related to issues having nothing to do with the company's underlying business and is likely not a sign of business deterioration. The departures could harm Nike's reputation as it plans to target female shoppers for future growth, Bloomberg reported, citing crisis-management firm Temin & Company.
