Business

Nike bounces back after July earnings miss

Footwear giant beats analyst estimates for sales nd earnings in first quarter

Photograph: Johannes Eisele/AFP/Getty Images

Eben Novy-Williams
Wed Sep 25 2019 - 08:42

Nike’s earnings miss in July is looking like an aberration.

The footwear giant on Tuesday reported quarterly sales and earnings that beat analysts’ estimates, sending the stock to an all-time high in extended trading.

The results put the prior quarter's miss in the rearview mirror and helped alleviate investors' fears about the ongoing trade war between the US and China. It also relieves concern that the strong US dollar will be a drag on Nike's bottom line.

Fiscal first-quarter earnings rose to 86 cents a share, Nike said Tuesday, beating the 70-cent estimate of analysts. Sales grew 7.2 per cent to $10.7 billion, topping projections of $10.4 billion.

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Nike shares rose as high as $92.42 in after-hours trading. They’re up 18 per cent this year through Tuesday’s close, in line with the S&P 500 Index.

Nike also posted strong sales to women, one of its biggest growth opportunities. The company saw double-digit growth in that category, "on the back of an incredible summer celebrating female athletes," chief executive Mark Parker said on a conference call.

The Women's World Cup was held this past summer in France, and Nike outfitted 14 of the tournament's 24 teams – including three of the four semifinalists and the champion US side. The US women set records for soccer-jersey sales on Nike.com, and Parker said the company's apparel revenue tied to the event was up fourfold over the 2015 tournament.

In December, Mr Parker said 2019 would be a "true tipping point" for women in sports. The company has continued to push that in its marketing, including "Dream Crazier" ads narrated by tennis champion Serena Williams and a "Dream With Us" campaign around the US women's soccer team.

In assessing the company's biggest long-term opportunities, chief financial officer Andy Campion listed women first, followed by apparel, digital and international. Even though women's clothing makes up more than half of the addressable market, those products accounted for just 23 per cent of Nike revenue last year.

Shoe Gaffe

The strong results show no ill effect from Nike's decision to pull a limited-edition shoe that featured a controversial version of the American flag or any backlash from allegations by lawyer Michael Avenatti that the company is facilitating bribery and corruption within college basketball.

In the past three months, the company also signed basketball phenom Zion Williamson to its Jordan brand.

Nike remains somewhat insulated from the escalating trade fight between the US and China, which includes tariffs on footwear and apparel. Though roughly a fourth of Nike's goods are made in China, some are sold within the country. The company has also diversified its production over the past decade, adding Vietnam for example.

That said, there were concerns the trade war might affect Nike's growth in China, by far the company's fastest-growing region. Those fears were unfounded. Nike's first-quarter sales in China grew 22 per cent, beating the 17 per cent growth estimate at Stifel Financial Corp.

While sales and profit beat estimates, the Oregon-based company didn’t completely escape the affects of currencies. The strong US dollar trimmed revenue growth by 3 percentage points, according to the company.

“Even amidst the increasingly volatile macroeconomic and geopolitical environment, we expect our unrelenting focus on better serving the consumer to continue fueling strong, broad-based growth,” Mr Campion said in a statement. – Bloomberg

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