Moody’s Investors Service changed Nike, Inc.’s debt ratings outlook to stable from negative to reflect Nike’s strong revenue and earnings growth that has improved its debt leverage.
Moody’s also affirmed all ratings for Nike, including the A1 senior unsecured rating and Prime-1 commercial paper rating.
“The affirmation and change in outlook to stable reflect Nike’s strong revenue and earnings growth powered by its successful execution of its Consumer Direct Acceleration strategy, which has resulted in improved financial leverage to levels that are more appropriate for its A1 rating,” stated Mike Zuccaro, Moody’s vice president. Demand for sports apparel and footwear remained resilient during the pandemic, as consumers remain focused on overall health and wellness and participation in sport. “While near-term challenges exist due to pandemic-related supply chain disruptions, we expect Nike to navigate through successfully and that it will maintain long term strength. Liquidity is very strong, supported by over $15 billion of cash and short-term investments and ample undrawn revolver availability,” Zuccaro added.
Ratings Rationale
Moody’s said, “Nike’s A1 rating reflects its significant scale in the global athletic apparel and footwear industry with revenues exceeding $46.3 billion for the twelve months ended November 30, 2021 and the ownership of the “Nike” brand whose distinctive “Swoosh” logo is one of the most recognized consumer brands in the world. Nike has a solid track record of revenue, earnings and cash flow growth for an extended period of time. The rating is also supported by Nike’s very strong liquidity, balanced financial policies and strong credit metrics which Moody’s expect will continue for the foreseeable future. The rating is constrained by the inherent cyclicality and changing consumer preferences in the global footwear and apparel industries and high concentration of revenue in a single brand.
“Environmental, social and governance factors are considered in Nike’s credit profile. As an apparel company, Nike faces industry challenges in sourcing products from third-party manufacturers in various countries. The global coronavirus outbreak is also viewed as a key social risk, given the substantial implications for public health and safety. With respect to governance, Moody’s expects the company to maintain a conservative financial strategy and moderate leverage, consistent with its longer-term track record.”
Photo courtesy Nike/Sole Collector
