Nike (NKE) beat analysts’ expectations with its fiscal first quarter earnings report late Thursday, and the market cheered. But the report raised some concerns for one analyst, who noted that along with the company’s strong sales growth, expenses appear to be rising quickly.
“SG&A growth is now expected to rise at a comparable rate to revenue growth of low-mid teens for the year. While this increase in spend is likely to support growth in front of the Olympics, it is nonetheless constraining EBIT expansion,” writes Canaccord Genuity analyst Camilo Lyon.
Revenue growth at the company has been “nothing short of impressive,” far outpacing expectations, but margins have dipped and expenses continue to raise question marks, Lyon writes.
“Given the strength of Q1 results coupled with the surge in futures orders, NKE raised its full year top-line guidance to low- to mid-teens growth from high-single- to low-double-digit growth previously. Gross margin is still expected to be down 100 bps for the year. SG&A dollar growth, however, is now expected to increase low to mid-teens from high single- to low double-digit growth.”
Lyon reiterated a $96 price target and a Hold rating.
Nike shares were up 6.3% to $89.50 in midday trading.
No comments:
Post a Comment