Nike set for further pain as Q2 guidance to show softer sales persist: UBS

Investing.com -- Nike Inc (NYSE:NKE) has a chance to reinvigorate investor sentiment as it gears up to report fiscal Q1 earnings, but UBS warns the sportswear giant's results and guidance is likely to show further weakness ahead.

"We believe this will result in Nike giving disappointing Q2 guidance which causes the stock's P/E to slide," UBS analyst Jay Sole said in a note ahead of Nike's Q1 results expected Oct. 1.

The athletic wear company is expected to report fiscal first-quarter earnings per share of $0.52, in line with consensus estimates.

Nike, however, is expected to provide second-quarter implied EPS guidance in a range of $0.65 to $0.75, UBS estimates, falling short of Wall Street forecast of 83 cents.

UBS flagged a series of weak data points and channel checks including Nike's sluggish U.S. direct-to-consumer sales, underperformance in its European business, and disappointing China sales growth.

"We believe Nike's global web traffic y/y growth decelerated to -23% in Q1 from -16% in Q4 and -13% in Q3," UBS noted.

But there are some positives catalysts for Nike including a drop in promotional activity, which could support margins.

Nike is down about 26% year to date, suggesting investor sentiment already leans slightly bearish, UBS says, "potentially limit downside risk."

UBS has a neutral rating on Nike, with a price target of $78 on the stock.