Home / Business / Nike can come out of the coronavirus in a position of strength, says UBS

Nike can come out of the coronavirus in a position of strength, says UBS



Nike Inc. buyers who couldn’t get to stores that were shut down by the coronavirus pandemic streamed to e-commerce channels during the financial third quarter.

In a revenue call Tuesday, CEO John Donahoe said digital accounted for about 20% of the company’s total business, with digital sales increasing 36% on a currency-neutral basis during the third quarter financial year.

Nike
NKE,
+ 6.69%

reported revenue of $ 1

0.1 billion during the quarter.

In China, while people were isolated at home, Nike said that active users each week on their activity apps increased by 80% at the end of the quarter compared to the beginning. Digital operations in China grew by 30%. Almost 80% of the stores in China are back in operation.

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“In addition to Greater China, we have used this playlist in Japan and South Korea over the past two months, and we are seeing early momentum in those markets as well,” Donahoe said during the call, according to a FactSet transcript. “And with COVID-19 now spread across Europe and the US, we use the same playlist.”

With digital sales rising sharply, UBS analysts said that e-commerce could offset the losses from global store closures.

“It also means that the likelihood of COVID-19 causing a liquidity problem for Nike is lower than we previously thought,” said analysts.

In a previous note, UBS said Nike has $ 5.5 billion in liquidity, which accounts for just 14% of calendar sales in 2019. By comparison Ralph Lauren Corp.
RL,
+ 6.30%

has $ 2.4 billion, but it accounted for 38% of last year’s sales.

“Finally, it suggests that Nike will have an even stronger competitive position when the COVID-19 situation ends with our previous view,” UBS said.

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UBS quotes Nike stock purchases with a price target of $ 114, down from $ 123.

Baird analysts say China is well on its way to recovery, with its financial fourth quarter seen as flat, showing “Nike’s superior positioning in the midst of a challenging environment.”

Baird calculates Nike shares neutrally with a price target of $ 85, starting at $ 103.

“Nike operates from a strength of brand (demand remains strong), product (strong pipeline / healthy sales through pre-coronavirus), digital (drives greater separation) and people / talent (Nike maintains payroll),” Baird analysts , under the direction of Jonathan Komp, wrote.

Raymond James analysts say that coronavirus encourages consumers to transition to more digital activity, and Nike, which has invested in its digital capabilities, is ready for the change.

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“We agree with Nike that COVID-19 is accelerating the change in the consumer to shop, interact and train more digitally,” said analysts. “Still, Nike’s new message” Playing Inside, Playing for the World “can help drive a new whisper in the meantime.”

Raymond James rates the Nike stock better than a $ 100 price target, up from $ 110.

The Nike share increased by 1.1% over the past year. Dow Jones industrial average
DJIA,
+ 6.37%

has fallen 6.7% for that period.


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