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ADIDAS AG

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Real-time Estimate Tradegate  -  12:49 2022-12-01 pm EST
124.89 EUR   +2.15%
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Nike slumps on margin pressure from excess inventory, stronger dollar

09/30/2022 | 06:30am EST
FILE PHOTO: Nike shoes are seen on display in New York

(Reuters) - Shares of Nike Inc plunged 9% in premarket trading on Friday after the world's largest sportswear maker warned of tighter margins as it deals with the relentless strengthening of the dollar and markdowns to clear ballooning inventory.

Nike expects full-year gross margin to fall 200-250 basis points after its total inventories surged 44% to $9.7 billion at the end of the first quarter.

The company, which gets more than half its revenue from outside North America, doubled its estimates for a hit to annual revenue from the soaring dollar to $4 billion.

Shares fell to $86.40. If losses hold through the session, it would be Nike's biggest one-day percentage fall since March 2020 and shave off about $13.5 billion in market value.

"The key debate is set to be around the likely pressure on gross margins for other companies as the industry follows the market leader's stepped up mark-down efforts and helps mop-up excess inventories," Jefferies analysts wrote in a note.

Shares of smaller rival Under Armour slipped 7.1%, while those of German peers Adidas and Puma skid 4.0% and 5.2%, respectively.

Slowing demand for Nike brands including Jordan and Converse is the latest evidence of consumers paring back on discretionary spending as they battle decades high inflation.

Some analysts, however, view Nike's inventory issues as a near-term problem, and are reiterating their bullish view on its shares.

"Nike's stock pullback represents a solid opportunity to own the highest quality name in the group," Credit Suisse wrote in a note.

The average rating of 36 brokerages covering the stock is "buy" and the median price target on the company is $115, down from $130 a month ago.

(Reporting by Medha Singh in Bengaluru; Editing by Anil D'Silva)


ę Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
ADIDAS AG 2.18% 124.92 Delayed Quote.-51.71%
CREDIT SUISSE GROUP AG -4.36% 2.699 Delayed Quote.-66.40%
NIKE, INC. 1.67% 111.5809 Delayed Quote.-36.25%
PUMA SE 3.08% 50.2 Delayed Quote.-54.70%
UNDER ARMOUR, INC. 0.35% 10.035 Delayed Quote.-53.56%
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Analyst Recommendations on ADIDAS AG
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Financials
Sales 2022 23 038 M 23 758 M 23 758 M
Net income 2022 517 M 533 M 533 M
Net Debt 2022 1 594 M 1 644 M 1 644 M
P/E ratio 2022 39,4x
Yield 2022 1,66%
Capitalization 21 915 M 22 599 M 22 599 M
EV / Sales 2022 1,02x
EV / Sales 2023 0,97x
Nbr of Employees 53 870
Free-Float 90,4%
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Technical analysis trends ADIDAS AG
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TrendsBullishNeutralBearish
Income Statement Evolution
Consensus
Sell
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Mean consensus HOLD
Number of Analysts 33
Last Close Price 122,26 €
Average target price 133,43 €
Spread / Average Target 9,14%
EPS Revisions
Managers and Directors
Harm Ohlmeyer CEO, Chief Financial Officer & Labor Director
Thomas Hermann Rabe Chairman-Supervisory Board
Andreas Hubert Group Chief Information Officer
Martin Shankland Head-Global Operations
Roland Nosko Member-Supervisory Board
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