Abu Dhabi, UAEFriday 23 August 2019

Sportswear company Nike climbs as earnings top estimates

Sales in China rose to $1.54bn, a 26 per cent jump over the same period last year.

Overall, Nike’s $9.37bn in sales topped estimates of $9.2bn. Reuters
Overall, Nike’s $9.37bn in sales topped estimates of $9.2bn. Reuters

Oregon-based Nike surged in trading after its second-quarter results soared past projections, particularly in its two most important regions: North America and Greater China.

Domestically, the world’s largest sportswear company posted its third-straight quarter of growth. That sustained momentum is a critical benchmark for investors. Nike was previously in a yearlong slump at home, letting rival Adidas make inroads.

“Our teams are driving change, and it’s yielding excellent results,” chief executive Mark Parker said on a conference call. “We find that the more disruptive we are, the more we grow.”

The earnings report was Nike’s first to include the impact of its controversial ad campaign featuring quarterback-turned-activist Colin Kaepernick. The inclusion of Kaepernick in the line of “Just Do It” ads initially rankled investors, though they eventually applauded the move. Mr Parker has said that the ads drove an uptick in traffic and engagement.

In China - Nike’s fastest-growing and highest-margin region - strong growth should alleviate concerns that political and currency volatility will hurt the business. Sales in China rose to $1.54 billion, a 26 per cent jump over the same period last year. It’s the 18th consecutive quarter of growth for Nike in the world’s most populous country, according to chief financial officer Andy Campion.

“We have not seen any impact on our businessfrom some of the US-China dynamics that we’re all reading about,” Mr Campion said on the call.

Overall, Nike’s $9.37bn in sales topped estimates of $9.2bn. Earnings per share and gross margins also outperformed expectations, sending the shares up as much as 8.8 per cent to $73.50 on Friday.

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Mr Campion said that Nike now expects currency-neutral revenue to be in the high single digits over the full year.

The positive results come as Nike works to revamp both its production and retail strategy. As part of the Triple Double campaign, the company is doubling its resources in three areas: innovation, speed and direct-to-consumer efforts. That means paring down the number of retailers it works with and focusing more on sales through its app and website.

It also includes a renewed approach to its Nike stores. In the last two months, Nike has opened new House of Innovation flagship shops in both Shanghai and New York City, both of which blend the in-person and online shopping experience.

Nike saw specific momentum in its women’s business, with footwear sales up 20 per cent for the quarter.

Updated: December 21, 2018 05:17 PM

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