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Nike reported much stronger earnings than expected after the close Tuesday however lower margins than expected saw $NKE shares fall about 3.5%. Nike has been courting controversery over its controversial advertisement featuring former NFL player Colin Kaepernick.


Nike Women Athlete

Nike Inc NYSE: NKE Beat Earnings After Close Thursday

 $0.67 Beat $0.62 EPS AND $9.95 billion Beat $9.88 billion forecast in revenue. 

Earnings 

Nike had EPS of 67 cents on revenue of $9.95 billion beat expectations of EPS of 62 cents and revenue of $9.88 billion. The concern was the margins were lower than expected.

Nike Inc NYSE: NKE

Market Reaction After hours $81.80 −$2.99 (3.53%)

"Nike's Consumer Direct Offense, combined with our deep line up of innovation, is driving strong momentum and balanced growth across our entire business," Chairman and CEO Mark Parker said in a statement. "Our expanded digital capabilities are accelerating our complete portfolio and creating value across all dimensions as we connect with and serve consumers."

Highlights and Outlook

Margin and Sales Breakdown

  • Nike Brand revenue grew 10% on a currency-neutral basis to $9.4 billion
  • Converse revenue rose 7% to $527 million.
  • North America  revenue grew 6% to $4.145 billion, double the 3% gain in fiscal Q4.
  • Europe, Middle East and Africa revenue rose 9% ex currency changes to $2.61 billion
  • Greater China revenue rose 20% to $1.38 billion
  • Asia Pacific and Latin America rose 14% to $1.27 billion. '
  • Gross margin widened to 44.2% from 43.7% a year ago, due to higher average selling prices, favorable full-price sales mix and margin expansion in Nike Direct, partially offset by higher product costs this was lower than analysts estimated of a gross margin of 44.3%.
  • Selling and administrative expenses increased 7% to $3.1 billion, with "demand creation" costs up 13% to $964 million, primarily due to sports marketing, brand campaigns and "key sports moments."

NKE Earnings Q1 19

Last quarter Nike had gone through eight consecutive quarters of gross margin declines, to recover with a reported 60 basis point increase in gross margin coming in at 44.7%, driven by higher average selling prices and helped by margin expansion in the company’s NIKE Direct initiative. Lululemon and Under Armour had seen similar strong results from changed selling initiatives.

 

$NKE North American sales growth began slipping last May, when it posted flat results and in Q2 North America sales fell 5%. Adidas has been gaining it's US market share by with new and differentiated products, reacting quickly to market demand. CEO Kasper Rorsted outlined a clear strategy and the company saw it's sales surge 74% year-over-as of May. Both Nike and some analysts see Nike recovering in North America which has finally happened this quarter.

  Stock Buyback

Nike last quarter announced a new four-year $15 billion program to repurchase Class B common stock. The buyback will begin after the company finishes a $12 billion repurchase program, which it said it anticipated completing in fiscal 2019, or next May. That brings the total to a hefty $27 billion dollar stock repurchase.

Nike are optimistic consistent release of new styles and colors for its popular VaporMax and Epic React models should support accelerated sales growth. 

Nike had been hampered by the probe into misconduct claims at Nike and the abrupt resignations of brand president Trevor Edwards and VP Jayme Edwards. 

Source: Nike, AlphaStreet

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