SBD/June 30, 2017/Finance

Nike Reports Earnings Well Ahead Of Wall Street Expectations Despite Challenging FY '17

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For its FY '17, Nike earned $4.2B on total revenue of $34.4B
Nike on Thursday announced "better-than-expected" Q4 and FY '17 earnings after a "bruising time of lost momentum and disappointing North American sales that led to a rare layoff earlier this month," according to Jeff Manning of the Portland OREGONIAN. Powered by "strong international sales gains," Nike earned $1B on revenue of $8.7B in its Q4. For its FY '17, Nike earned $4.2B on total revenue of $34.4B. Those numbers "handily topped the consensus of Wall Street analysts" (Portland OREGONIAN, 6/30). In Portland, Bell & Siemers noted the close of the quarter "marks the end of a challenging year" for Nike, which has "found itself losing some of its market share to Adidas" (BIZJOURNALS.com, 6/29). Meanwhile, ENGADGET's Richard Lawler reports Nike made some $2B in FY '17 "via its apps and website -- more than double the year before" (ENGADGET.com, 6/30). Despite beating earnings expectations, CNBC’s Mike Santoli said Wall Street is "as cool on Nike as it’s been in a long time” with less than 60% of analysts "recommending it.” SW Retail Advisors President Stacey Widlitz said it is "an Adidas world right now,” as the brand is steadily gaining marketshare, which “comes right out of Nike’s pocket” (“Closing Bell,” CNBC, 6/29). At presstime, shares of Nike were trading at $58.06 per share, up 9.19% from the close of business Thursday (THE DAILY).

BURYING THE HATCHET: Nike President, Chair & CEO Mark Parker officially said that the company is "starting a pilot program to sell sneakers" through Amazon, ending a "long stalemate between the sportswear giant and the online retailer." Parker on Thursday said that Amazon would "carry 'a limited Nike product assortment' of footwear, apparel, and accessories." Parker said, "We're in the early stages, but we really look forward to evaluating the results of the pilot" (WSJ.com, 6/29). CNBC contributor Tim Seymour said Nike is “playing from a position of strength" on the Amazon agreement, as he does not "think Nike has to do this deal.” Seymour: “I see this as Nike almost treating Amazon like their outlet mall … (and) it’s still the best run company in that space.” CNBC contributor David Seaburg said Nike is offering their "lowest-cost products” on Amazon, but they are "not creating more demand, all they’re doing is taking from brick-and-mortar. So it hurts brick-and-mortar and their wholesalers” ("Fast Money," CNBC, 6/29). CNBC's Sara Eisen said Parker is not "giving a whole lot of detail" on the Amazon deal, which is "painting it as more of an experiment." Eisen: “What they really need to get out of this deal is that Amazon should stop letting third parties sell Nike in order to drive the traffic to the Nike store on Amazon.” Santoli said Nike “clearly wants to try to maintain the tight control it has over what products appear where and when, and maybe this is one instrument for them to perhaps do that” ("Worldwide Exchange," CNBC, 6/30).

WANT WHAT THEY CAN'T HAVE: Nike co-Founder & Chair Emeritus Phil Knight said former NBA Commissioner David Stern "did us a huge favor" for the "distinctive looking" Air Jordan 1 shoes in '84. Knight: "He banned it from the NBA and so we ran a big ad that said, 'Banned in the NBA,' and every kid wanted the shoe then." Knight, appearing on Bloomberg TV, said when Michael Jordan retired from basketball, "We were selling about $700 million worth of Jordan product and it's now become a brand and we're selling over $3 billion worth of Jordan products. Some kids really know who he was, as an all-time great, but some kids don't even know who he was. It became a brand. It went from an endorsement to a brand" ("The David Rubenstein Show: Peer-to-Peer Conversations," Bloomberg, 6/28).
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