Nike announced that the company will be eliminating 1400 jobs in the coming year. The athletic shoe retailer determined that job cuts were needed for cost savings. The preemptive job cut has me wondering if Nike will be able to meet earnings expectations for next month quarterly earnings. Nike has been a bellwether of economic growth by increasing earnings for the past 10 years. The company has traditionally dazzled the market by historically exceeding analyst expectations when it comes to quarterly earnings.
It will be difficult even for a company like Nike to meet its earnings expectations over the next two quarters. For its fiscal 3Q 2009, Air Jordan 10 Retro Nike is expected to report earnings of .82 cents per share. Earnings expectations for the 4Q have not been guided down and are estimated at $1.11. Nike may have a difficult time meeting these earnings expectations because Nike LeBron 11 this recession has been longer and deeper Air Jordan 23s than originally expected. The current economic landscape has not been kind to retailers. Nike has been shielded from the economic downturn so far but if the company does miss on its quarterly earnings the stock will be under pressure.
The stock looks cheap trading at $45.05, which is very close to its 52 week low of $42.68, but it may drop even further in the near term. Nike shares are only down 25.7% over the past year compared to rivals such as Adidas whose shares are down over 60%.
While shoes are a necessity, expensive athletic footwear Air Jordan 15s is still a discretionary item. If earnings per share come in at $3.89 for FY 2010 the stock would be incredibly cheap at $38 which would give the stock Air Jordan 7s a multiple below 10. This would be well below analyst expectations of $4.14 per share for 2010. I do like Nike shares for the long term and continue to hold shares because of its solid financial position, strong brand name and management team.