Nike inventory hits report excessive as outlook beats expectations

Pedestrians walk past the American multinational sportswear brand Nike Store and its logo seen in Hong Kong.

Budrul Chukrut | LightRakete | Getty Images

Nike stock surged more than 14% Friday morning, hitting a record high after the sneaker maker forecast annual sales of over $ 50 billion as its North American business rebounded from the lows of the coronavirus pandemic.

And in Greater China, sales appear to be improving. Nike management said the company is confident it will regain the trust of customers there as it boycotts Western brands over statements expressing concerns about alleged forced labor in Xinjiang.

“These are times when strong brands can get stronger, and each quarter that reality becomes more apparent,” said John Donahoe, Nike chief executive officer, during a conference call Thursday evening.

Nike stock traded at $ 152.70 at 9:35 a.m. ET. The retailer, with a market cap of more than $ 211 billion, last posted an all-time high of $ 147.95 on December 21.

All over the world, Nike sees shoppers buying new sneakers and fashionable tracksuits as more and more people reconnect. The company’s Jordan brand was a particular ray of hope.

During the three-month period ended May 31, total Nike sales doubled from $ 6.31 billion a year ago to $ 12.34 billion, surpassing Wall Street estimates by more than $ 1 billion. In North America, Nike’s largest market, sales more than doubled to a record $ 5.38 billion.

After Nike’s optimistic fourth quarter results on Thursday afternoon, Cowen & Co. analyst John Kernan raised his target price from $ 145 to $ 181. Kernan said he saw a way for the company’s market cap to surpass $ 300 billion one day.

“Management confidence marks a turning point and the fourth quarter results show the digitally driven acceleration of the financial model,” he said in a statement to clients.

Telsey Advisory Group analyst Cristina Fernández said Nike is benefiting from deeper customer loyalty through its membership program, higher full-price sales, greater data usage and a smarter wholesale model with strong partners like Foot Locker.

Telsey has raised its price target on Nike shares from $ 160 to $ 180.

“The Nike brand’s strong global momentum more than offsets the pressure in China and supply chain restrictions,” Fernandez said in a statement to customers.

At least 12 brokers have already raised their price targets on Nike shares after the company’s fourth quarter release. The average target price of analysts covering the company is now $ 176.90, according to FactSet.

“The company is developing from the Covid period into the largest P&L developments in our coverage universe,” said Credit Suisse analyst Michael Binetti.

Nike guarantees “a significant valuation premium,” he added, compared to other global apparel and footwear brands.

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