Nike Inc (NKE.N): Weak Qtr and Guidance; Cost Cuts Becoming the Star of the Show (Makes Premium Multiple Hard to Justify)

Citi maintains a Neutral rating on Nike (NKE.N) while lowering its target price to US$32 from US$39. 1Q EPS of $0.48 beat consensus of $0.42, but the beat was driven by weaker sales and better SG&A. Total cc sales fell 4% (NAM +2%, EMEA -5%, China -26%, APLA flat); EBIT margin was flat at 7.9%, with GM +61bps and SG&A -3%. Management guided F27 revenue to decline high-single-digits, below consensus of -2.4%, and adj. EPS at $1.15-1.35 (excluding $0.15 of PACE severance costs) versus consensus of $1.56, with pressure in global sportswear, Jordan and the China reset expected to persist into F28. NKE announced a $2.5bn cost savings program (~5.5% of F26 sales) requiring ~$1bn of investment (including $300mm severance), but savings won't move the dial until F29. Citi cuts F27E EPS to $1.35 from $1.48 and F28E to $1.54 from $1.91, modeling F27/F28 sales of -9%/-0.5% and EPS of -36%/+14%. The $32 TP implies F27/F28E P/E of 23.7x/20.8x and EV/EBITDA of 14.1x/12.7x;