NIKE Inc. (NYSE:NKE) is set to announce its second-quarter fiscal 2024 results on December 21, projecting potential top-line growth alongside a projected decline in earnings per share. The company’s success has been attributed to the Consumer Direct Acceleration strategy, robust demand, and digital and DTC business performance. However, challenges such as supply-chain constraints and ongoing weaknesses in Greater China have impacted bottom-line performance.
The Consensus Estimate anticipates fiscal second-quarter revenues at $13.4 billion, reflecting a 0.8% increase from the prior year, with earnings expected to decline by 1.2% to 84 cents per share. Earnings estimates have remained unchanged in the past 30 days.
NIKE is expected to have benefited from brand strength, consumer demand, and an innovative product pipeline in the second quarter. Gains from the Consumer Direct Acceleration strategy and robust digital and DTC performances are also expected. Retail traffic trends within NIKE Direct have boosted conversion rates, contributing to a record digital performance. Strength in North America, EMEA, and APLA regions is likely to have supported sales.
The NIKE Direct business, driven by growth across regions and an efficient digital ecosystem, is expected to show improved performance. Revenues at NIKE-owned stores are likely to have gained from improved traffic and higher conversion rates. However, challenges persist in Greater China.
Total NIKE Brand revenues are expected to increase 1.2% year over year to $12,872.7 million, driven by growth in Direct-to-Consumer and Wholesale businesses.
Despite predictions of revenue growth, NIKE has faced challenges in declining gross and operating margins due to rising costs, higher markdowns, and currency headwinds. Elevated SG&A expenses are also a concern.
Management expects a 100-bps improvement in gross margin for the second quarter of fiscal 2024, offset by higher product input costs and negative impacts of adverse currency rates. Elevated SG&A expenses are driven by increased demand-creation expenses and overhead costs.
Anticipated expenses include higher wage-related expenses, NIKE Direct costs, and technology investments. Second-quarter fiscal 2024 SG&A expenses are expected to increase in the mid to high-single digits.
Projections indicate a 100-bps expansion in gross margin to 43.9%, a 5.8% rise in SG&A expenses, an 8% increase in demand-creation expenses, and a 5% rise in operating overheads year over year. The model suggests a 50-bps contraction in the operating margin to 11.4% in the fiscal second quarter.
Featured Image: Pixabay @ Pexels
Author Stephanie Bédard-Châteauneuf 
