UAA - Wall Street Breakfast Podcast: Nike Warns On Soft Sales Increased Promotions

2023-12-22 06:57:08 ET

Summary

• Nike's earnings report shows soft quarter in North America, dragging down revenue below expectations.
• Cytokinetics soars amid report of Novartis, AstraZeneca takeover interest.
• U.S. Department of Transportation opens investigation into major U.S. carriers' frequent flyer programs for potentially unfair practices.

Listen below or on the go on Apple Podcasts and Spotify

Retail shocker: Nike ( NKE ) warns on soft sales , high promotional activity. (00:26) Cytokinetics ( CYTK ) soars amid report of Novartis (NVS), AstraZeneca ( AZN ) takeover interest . (02:35) Government opens investigation into frequent flyer programs. (03:12)

This is an abridged transcript of the podcast.

Nike (NYSE: NKE ) is down in premarket action following it’s earnings report.

Margins and EPS topped estimates, but a soft quarter in North America dragged down the revenue total to below the consensus expectation.

Nike’s Q2 GAAP EPS of $1.03 beats by $0.18. Revenue of $13.39B (+0.5% Y/Y) misses by $40M.

Revenue increased 4% year-over-year in Greater China to $1.86B, but fell short of the consensus expectation of $1.97B. The Asia Pacific & Latin America segment saw a 13% increase in revenue during the quarter and the Europe segment generated 2% revenue growth, but revenue fell 4% in North America.

Net income for the apparel giant was $1.6B vs. $1.33B a year ago.

Nike guided for FQ3 reported revenue to be slightly negative and for FQ4 reported revenue to be up at a low single-digits rate, which were both below the prior expectation of analysts. Nike ( NKE ) said the forecast reflects increased macro headwinds, particularly in China and EMEA (Europe, Middle East, Africa), as well as some supply chain disruption.

Nike ( NKE ) also outlined its streamlining efforts that will include reducing management layers, simplifying the product assortment, increasing automation and use of technology, streamlining the organization, and leveraging scale to drive greater efficiency. Overall, Nike ( NKE ) thinks it can find about $2B in cost savings. The company will take pretax restructuring charges of between $400M to $450M.

Nike ( NKE ) CFO Matthew Friend also warned of a "highly promotional" retail environment.

Nike’s peers are also lower this morning following the report. Under Armour ( UAA ) -5%, Lululemon ( LULU ) -1.8% and Foot Locker ( FL ) -6.4%.

Cytokinetics (NASDAQ: CYTK ) jumped 25% amid a report that Novartis ( NVS ) and AstraZeneca ( AZN ) may be interested in a takeover amid strong interest as the company explores its options.

According to a Dealreporter item on Thursday, which cited people familiar with the matter, the pharma giants are in a wait-and-see mode as Cytokinetics ( CYTK ) is expected to announce late-stage data for its drug for heart disease this month.

According to the report, other strategic buyers are also engaging with the biotech firm as they wait for the data to be released.

Premarket Cytokinetics ( CYTK ) is down 0.4%.

The U.S. Department of Transportation has opened an investigation of frequent flyer programs offered by major U.S. carriers for potentially unfair or deceptive practices.

The investigation is focused on certain loyalty programs which make it difficult for members to use their miles for flights either by devaluing the miles or inflating the cost of buying additional miles.

The examination will also take a look at whether the airlines are providing adequate transparency to travelers when booking flights with frequent flyer miles.

According to Forbes , of the major carriers, Delta's (NYSE: DAL ) SkyMiles ( DAL ) is the most valuable loyalty program, followed by American's ( AAL ) AAdvantage program, and United's MileagePlus (NASDAQ: UAL ). The three programs have a combined value of close to $73B.

Thursday on Wall Street Breakfast, Carnival was in our earnings spotlight.

On Thursday, the company reported an adjusted loss of $0.07 per share-- its narrowest loss since the pandemic -- versus a loss of $0.85 per share in the prior year's quarter, beating Street expectations by 6 cents.

Revenue for both the quarter and the year set a record high of $5.4B and $21.6B , respectively, topping expectations for $5.3B for the quarter.

The company also reduced its debt balance by $4.6B from its peak in Q1 2023 and ended fiscal 2023 with $5.4B of liquidity, while bookings remained strong and continue to exceed expectations for the following year.

Following the report, Carnival ended Thursday 6.2% higher.

On our catalyst watch for the day,

• It is the preliminary proxy deadline for the proposed merger between Alaska Airlines ( ALK ) and Hawaiian Holdings ( HA ).

Other articles to look out for on Seeking Alpha:

Nine buy-rated stocks in the Communication Services sector - Citi

Becton, Dickinson in $85M settlement over failure to disclose defects with infusion pumps

DOJ says Ultragenyx to pay $6M to resolve Medicare claims allegations

U.S. stocks on Thursday staged a rebound following a big sell-off in the previous session.

The Nasdaq ( COMP.IND ) led the three major averages on Thursday, adding 1.26%. The Dow ( DJI ) climbed 0.87%. The S&P 500 ( SP500 ) advanced 1.03%.

All 11 S&P sectors ended in the green.

Treasury yields were mixed on Thursday. The 10-year yield ( US10Y ) was up 1 basis point to 3.89%. The 2-year yield ( US2Y ) was down 2 basis points to 4.35%.

Now let’s take a look at the markets as of 6 am. Ahead of the opening bell today, Dow, S&P and Nasdaq futures are in the red. The Dow is down 0.3%, the S & P 500 is down 0.05% and the Nasdaq is down 0.1%. Crude oil is up 0.8% at more than $74 per barrel. Bitcoin is down 0.6% and above $43,000.

In the world markets, the FTSE 100 is up 0.3% and the DAX is flat.

The biggest movers for the day premarket: Rocket Lab USA (NASDAQ: RKLB ) is up 16% in early trading following the company’s announcement that it secured a $515 million contract with a U.S. government customer to design, manufacture, deliver, and operate 18 space vehicles.

On today’s economic calendar:

• 830 am personal income and outlays

• 10am consumer sentiment

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