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Nike shares fall as supply chain havoc leads retailer to slash revenue forecast

Nike shares dropped after the sneaker giant said supply chain congestion is hurting the business more than it previously anticipated.



Pedestrians walk past the American multinational sport clothing brand, Nike store and its logo seen in Hong Kong.

Budrul Chukrut | LightRocket | Getty Images

Nike shares dropped more than 3% in extended trading Thursday after the sneaker giant said supply chain congestion is hurting its business more than it previously anticipated.

The sneaker giant lowered its fiscal 2022 outlook to account for longer transit times, labor shortages and prolonged production shutdowns in Vietnam.

Nike now expects full-year sales to increase at a mid-single-digit pace, compared with a prior outlook of low double-digit growth. In the fiscal second quarter, it sees sales flat to down low single digits. Analysts had been looking for revenue growth of 12% for the year, as well as a 12% increase for the second quarter, according to Refinitiv data.

Nike’s revised forecast comes in the wake of a mixed first-quarter earnings report. It missed revenue expectations, as demand in North America softened. But the company sold more goods to shoppers at full price, boosting profits.

Here’s how Nike did during its fiscal first quarter compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.16 vs. $1.11 expected
  • Revenue: $12.25 billion vs. $12.46 billion expected

Over the next few quarters, Nike anticipates its entire business will see short-term inventory shortages, Chief Financial Officer Matt Friend said during a conference call.

Since mid-July, the company has been working through factory shutdowns in Vietnam, where it produces roughly 50% of its footwear and 30% of its apparel. Facilities have been closed as the government tries to tamp down the spread of the Covid-19 virus. About 80% of Nike’s footwear factories in southern Vietnam and roughly half of its apparel factories in the area remain closed, Friend said.

“We’ve already lost 10 weeks of production, and that gap will continue. … It’s going to take several months to ramp back to full production,” he told analysts.

Once its products are produced, Nike is also running into shipping delays. According to Friend, transit times in North America are double pre-pandemic levels, taking an average of 80 days to move goods from Asia to Nike’s home turf.

Nike said demand worldwide for its shoes and workout apparel remains strong. But with these bubbling inventory issues, near-term performance will be hurt.

Management said fiscal first-quarter results would have been incrementally stronger, were it not for the supply chain snafus. Bottlenecks are resulting in a material lack of supply, leaving some consumers empty-handed.

Nike’s fiscal first-quarter sales climbed to $12.25 billion from $10.59 billion a year earlier but were short of analysts’ expectations of $12.46 billion.

China posted the smallest gain of any of its geographies, climbing 11%. In past quarters, the region had been one of Nike’s biggest revenue drivers.

Revenue in North America rose 15% to $4.88 billion. That was short of the $5.05 billion that analysts polled by FactSet were looking for.

Digital sales for the Nike brand rose 29% year over year. The retailer has been investing in its website and a suite of mobile apps. That has been especially beneficial during the health crisis, when many people have opted to shop from their homes.

“Digital is increasingly becoming a part of everyone’s shopping journey, and we are well positioned to reach our vision of a 40% owned digital business by fiscal 2025,” Friend said.

However, one upside to tightened inventories has been greater profitability on the products that Nike sells, since the company has little incentive to discount. Nike has also been reducing its reliance on wholesale partners that often sell at a markdown.

Net income grew to $1.87 billion, or $1.16 per share, compared with $1.52 billion, or 95 cents per share, a year earlier. That topped analysts’ expectations for $1.11 a share.

Analysts and investors had been expecting sales to take a temporary hit from the drop-off in manufacturing. The lockdowns are also impacting a number of other retailers, ranging from athleisure rival Lululemon to the high-end furniture chain RH.

Wall Street research firm BTIG earlier this month had downgraded Nike’s stock, seeing order cancellations running through at least next spring.

“Over its history, Nike’s stock has been most tightly correlated with sales growth, so with growing evidence that sales will likely stall, we believe Nike’s stock will at best tread water until more clarity is had around its manufacturing issues,” BTIG analyst Camilo Lyon said in a research note.

Nike shares are up about 13% year to date, as of Thursday’s market close, but down about 9% from an all-time high reached in early August. That’s when talk of the supply chain congestion started to pick up.

Nike said it ended the latest quarter with inventories of $6.7 billion, which was about flat from a year earlier, and down slightly from inventories of $6.9 billion in the prior period.

For the balance of this fiscal year, the company said, it sees demand outweighing supply. But it expects to return to more normalized inventory levels in fiscal 2023.

“Over the past 18 months, we’ve demonstrated our ability to manage through turbulence,” Chief Executive Officer John Donahoe said Thursday. “And that’s what we’ll continue to do as we navigate through these current supply chain issues. We’ll focus on what we can control.”

Find the full press release from Nike here.



Dow rallies nearly 500 points after hot start to the earnings season

A lower-than-anticipated number of weekly jobless claims added to the positive market sentiment.



U.S. stocks rose Thursday after better-than-expected earnings reports from Bank of America and other major companies.

The Dow Jones Industrial Average jumped about 475 points, or 1.4%. The S&P 500 gained 1.5% and the Nasdaq Composite added 1.7%.

Third-quarter earnings season continued Thursday with several big banks and Dow members reporting financial results before the bell.

Eight members of the S&P 500 reported earnings this morning and all eight beat earnings-per-share expectations from Wall Street.

“So far, the overwhelming majority of large US companies have been able to generate higher profitability despite rising labor costs because sales growth has been so robust. We expect the same to be true in 3Q,” Mark Haefele, chief investment officer of UBS Global Wealth Management, said in a note Thursday.

Bank of America, Morgan Stanley saw their shares rise after beating earnings expectations. Wells Fargo shares declined and Citigroup traded near the flatline despite earnings beats.

Walgreens Boots Alliance shares gained after the drugstore chain beat earnings expectations and the stock was the top performer in the Dow. The company announced it would become majority owner of VillageMD with a $5.2 billion investment.

Dow constituent UnitedHealth also gained after the companies’ quarterly results topped estimates.

Meanwhile, falling rates boosted technology stocks. The benchmark U.S. 10-year Treasury yield dipped, typically benefiting high-growth names as lower rates lift the value of companies’ future earnings.

Big Tech stocks Microsoft, Apple and Facebook each rose at least 1%, while and Google-parent Alphabet gained more than 2%, providing the market with support.

Caterpillar was among the Dow’s biggest gainers after Cowen initiated coverage of the equipment maker with an outperform rating. UPS rose as one of the S&P 500’s top performers after an upgrade from Stifel, which cited upcoming holiday demand.

A lower-than-anticipated number of weekly jobless claims added to the positive market sentiment. Initial unemployment insurance claims last week totaled 293,000 – the first time the tally fell below the 300,000 level during the pandemic-era.

“We’re seeing fresh and welcome signs of improvement in the job market,” said Bankrate’s Mark Hamrick.

September’s producer price index was lighter than expected, also helping sentiment. Wholesale prices rose 0.5% from the month prior versus the 0.6% Dow Jones estimate.

—CNBC’s Michael Bloom contributed to this report.


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Stock futures are little changed as the Dow tries to avoid a third-straight losing day

The market suffered losses to start the week with the blue-chip Dow shedding 250 points.



Stock futures were little changed on Tuesday as the market tried to get out of its recent funk driven by concerns about the economy and inflation.

Futures on the Dow Jones Industrial Average were lower slightly, having earlier pointed to a loss of more than 200 points at one point in the overnight session. S&P 500 futures were also about flat. Nasdaq 100 futures were the standout, adding 0.2%.

Tech stocks such as Tesla, Alphabet, Netflix, Nvidia and AMD were higher in premarket trading.

The market suffered losses to start the week with the blue-chip Dow shedding 250 points. The S&P 500 fell 0.7% Monday with nine of the 11 sectors registering losses, while the tech-heavy Nasdaq Composite dipped 0.6%. It was the second negative session in a row for the Dow, S&P 500 and the Nasdaq.

“There are a lot of headwinds out there as we embark on corporate earnings, and traders will be looking for any and all indications of guidance — especially as the threat of slower growth looms large,” said Chris Larkin, managing director of trading at E-Trade Financial. “As new data emerges and traders gain some potential insight into growth prospects, it may be wise to prepare for more bumps in the road.”

JPMorgan Chase and other big banks are about to kick off the third-quarter earnings season later this week. Earnings growth is expected to grow about 30% year over year this quarter following a 96.3% expansion in the second quarter, according to Refinitiv.

Stock picks and investing trends from CNBC Pro:

“Expectations for third quarter earnings have been coming down in recent weeks and that should create some room for upside surprises, which is good for overall market sentiment,” said Rod von Lipsey, managing director at UBS Private Wealth Management.

Investors will monitor the latest employment data on Tuesday as the Labor Department releases its Job Openings and Labor Turnover Survey. Economists polled by Dow Jones expect 10.9 million job openings in August, unchanged from the total in July. Stocks fell on Friday after a disappointing jobs report.

The stock market went through a bumpy ride in September, with the S&P 500 falling 4.8% for its worst month since March 2020 and breaking a seven-month winning streak. The benchmark has recovered somewhat in October, up about 1.3% for the month.

But the rebound has stalled out a bit in recent days. Wall Street major strategists are seeing muted returns for the rest of 2021 as the average year-end S&P 500 target stands at 4,433, less than 2% from Monday’s close, according to the CNBC Market Strategist Survey.

The market suffered losses to start the week with the blue-chip Dow shedding 250 points. The S&P 500 fell 0.7% Monday with nine of the 11 sectors registering losses, while the tech-heavy Nasdaq Composite dipped 0.6%. It was the second negative session in a row for the Dow, S&P 500 and the Nasdaq.


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Ford’s sales improving but still down by 27.4% in the third quarter

The drastic fall was narrower than auto forecasters expected, but wider than the overall industry that was projected to be down between 13% and 14%.



Thousands of Ford F-150s without chips are stored at Kentucky Speedway in Sparta, Kentucky, U.S., September 8, 2021.

Jeff Dean | Reuters

DETROIT – Ford Motor’s U.S. vehicle sales showed signs of improvement during the third quarter, but still fell by 27.4% from last year as an ongoing shortage of semiconductor chips interrupted vehicle production.

The drastic decline was narrower than auto forecasters expected, but wider than the overall industry that was estimated to be down between 13% and 14% from the same time last year. Cox Automotive expected Ford’s sales to be down by 37.3% during the third quarter, while Edmunds forecast a 29.3% decline.

A silver lining is Ford’s sales improved during the quarter from losses of more than 30% in July and August to 17.7% in September, signaling better supply of semiconductor chips. Its vehicle inventory also improved to 236,000 cars and trucks, up 21,000 units compared with the start of September.

Shares of Ford were up by more than 4% in trading Monday morning.

Ford sold 400,843 vehicles in the third quarter, including more than 156,600 in September. Its sales heading into October were nearly 1.4 million, down by 7% compared with the first three quarters of 2020.

Ford said reservations for its upcoming F-150 Lightning electric pickup have topped more than 150,000. That compares with 100,000 reservations at the end of the second quarter, according to the company.

Shares of Ford were up by more than 4% in trading Monday morning.


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