Nike’s debt rating goes from negative to stable

Moody’s Investors Service changed Nike Inc.’s debt rating outlook to negative from stable to reflect strong revenue and earnings growth at Nike that improved its debt leverage.

Moody’s also affirmed all of Nike’s ratings, including 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, fueled by the successful execution of its Consumer Direct Acceleration strategy, which resulted in improved financial leverage at more appropriate levels for its A1 rating,” said Mike Zuccaro, vice president of Moody’s. Demand for athletic apparel and footwear has remained resilient during the pandemic, with consumers remaining focused on overall health and wellness and sport participation. “While short-term challenges exist due to pandemic-related supply chain disruptions, we expect Nike to weather this successfully and maintain its long-term strength. Liquidity is very strong, backed by over $15 billion in cash and short-term investments and ample availability of unfired revolvers,” 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 brand ownership. “Nike” whose distinctive “Swoosh” logo is one of the world’s most recognized consumer brands. Nike has a strong track record of growing revenue, earnings and cash flow over a long period. The rating is also supported by Nike’s very strong liquidity, balanced financial policies and strong credit metrics which Moody’s expects will continue for the foreseeable future The rating is limited by inherent cyclicality and changing consumer preferences across industries global footwear and apparel markets, as well as the high concentration of revenues 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 considered a major social risk, given the significant 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.

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