Nike 1Q results: Implications for sportswear companies

Nike (covered by Matthew R. Boss) announced 1Q (Jun-Aug) results on October 1. 1Q sales were down 5% YoY (FX neutral), slightly underperforming JPM's forecast of a 4% decline. The company forecasts a high-single-digit YoY decline in sales for the full fiscal year (it expects the trend to worsen from 2Q). Management signaled that it plans to curtail sales in businesses where conditions are likely to remain challenging in 2Q and beyond (primarily Nike Sportswear, Jordan Brand, and Greater China), but based on 1Q results, we think the overall market could continue to be characterized by excess inventories and heavy discounting for some time. Given that concerns about the market environment had already arisen, we do not view Nike's 1Q results as additional bad news for other sportswear companies. Some performance categories, such as running, remain solid.