By Tonya Garcia, MarketWatch
Foot Locker also had a dozens-deep line of customers on Saturday, Raymond James said
Shopping at the mall might be different nowadays, but that didn't stop consumers from lining up to buy the latest gear at a Nike Inc. store in Atlanta, according to Raymond James analysts, who said they spotted dozens of people lined up at a mall waiting over the weekend.
Georgia began reopening businesses, including gyms and tattoo parlors, in late April (). Raymond James updated its channel checks at the Lenox Plaza mall, one of the largest in the U.S., according to analysts, on the second week of reopening.
"Nike had a line of 40 people on both Friday and Saturday," analysts led by Matthew McClintock wrote. "The store was running at capacity (50 people it appeared) and more than 15 people were checking out on both days and at different times (equally registering footwear and apparel)."
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Nike (NKE) gave a business update late last Thursday (), saying that just 5% of stores in North America are open. Across China and South Korea, all of the company's stores and 95% of its partners are now open, though some are operating at reduced hours.
There had been concerns that, even if stores reopened in the U.S., shoppers would be nervous about returning to them. To lure consumers back, stores have emphasized the sanitizing processes they've implemented, and the social-distancing measures and other steps taken to keep from spreading COVID-19 in their bricks-and-mortar locations.
For example, Best Buy Co. Inc. (BBY) has said that customers will have to make an appointment for in-store service.
Read:Best Buy's store reopening strategy gives every customer one-on-one service ( )
Raymond James noticed mall-traffic increases this weekend versus the weekend before, with about half the traffic on Friday compared with a pre-coronavirus-pandemic Friday. About 45% of stores were open and about 40% of restaurants were operating, analysts said, some with the option to dine in.
"We observed that social-distancing guidelines remained unchanged from the prior week (with markers on floor, limited capacity, all employees wearing masks) while slightly more than half of customers elected to wear masks (this was about in line to last week)," the note said.
See:Olive Garden parent reopened nearly all of its dining rooms in Georgia. Here are the new COVID-19 rules ()
Analysts note that most fitting rooms were closed, and that both Apple Inc. (AAPL) and Microsoft Corp. (MSFT) stores were closed. Raymond James suggests that would-be customers are heading to Best Buy instead.
"Athletic retail is one of the strongest buckets of retailers already reaching above 50% of normal traffic levels," analysts said.
Lululemon Athletica Inc. (LULU), Under Armour Inc. (UAA) (UAA) and Adidas AG (ADS.XE) (ADS.XE) stores were closed, which means the companies could have been missing out on potential sales, Raymond James wrote.
See:Under Armour stock jumps after Allianz's Mohamed El-Erian named lead independent board director ()
Raymond James also said teen-oriented retailers, like Forever 21 and American Eagle Outfitters Inc. (AEO), were busy.
Foot Locker Inc. (FL) was open, and, in addition to reaching the maximum capacity of 15 customers in the store, 20 people were queued up outside on Friday, and 35 stood on line on Saturday.
"Despite minimal promotional activity overall, we saw strong conversion across the athletic retailers particularly for premium-based footwear," the note said. "This indicates consumers are willing and able to return to malls for these products. In the best case scenario, we expect physical athletic foot traffic could reaccelerate to a flattish growth rate by 3Q20 (this coincides with the apparent timeline in China per Nike)."
Raymond James rates Nike stock-market perform.
While highlighting the positive tone of the business update, Stifel analysts caution using China as a recovery template because the region has a more robust digital business and many regions are already lagging behind China in its business recovery.
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"While we continue to view Nike as strategically advantaged compared to competitors against the COVID-19 backdrop we remain comfortable with FY4Q numbers below consensus," Stifel wrote.
Analysts there rate Nike stock buy with a $90 price target, noting that the company has qualities, including in digital, that make it "uniquely positioned to execute to a more direct model."
The FactSet consensus is for fourth-fiscal-quarter earnings per share of 16 cents, down from 62 cents last year, and sales of $7.87 billion, down from $10.18 billion in 2019.
Nike is scheduled to announce its fourth-quarter earnings on June 4.
BMO Equity Research rates Nike outperform with an $87 price target.
"We expect Nike will feel the dislocation expected to be felt across retail; however, we also believe it is best situated to grab share through the havoc," analysts led by Simeon Siegel wrote.
Nike stock closed up 4.7% on Monday, and has gained 7.7% over the last year. The Dow Jones Industrial Average is down 4.5% for the past 12 months.
-Tonya Garcia; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
May 19, 2020 08:04 ET (12:04 GMT)
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