Nike's Q4 results ended its "long streak of strong growth" in North America, as the company's profits fell 2% and sales were flat, according to financial reports cited by Germano & Stynes of the WALL STREET JOURNAL. Driven by "gains overseas," overall revenue rose 6% for the quarter that ended May 31, but the results "disappointed analysts." Nike has "continued to clear excess inventory and battled increased competition" from Under Armour and adidas. Before yesterday's results, Nike's stock price had already fallen 15% in '16. Futures orders for North America "increased 6% for products scheduled for delivery over the next six months," which compared with growth of 13% a year earlier and an increase of 10% in the previous quarter. For the first time, Nike "broke out sales of its Jordan Brand segment." Jordan sales rose 18% to $2.8B, while Nike brand basketball sales fell 1% to $1.4B. Nike also reported an overall profit of $846M for Q4, down from $865M a year earlier. Revenue was $8.24B, up from $7.78B. In North America, revenue edged up 0.1% to $3.74B. Nike said that futures orders rose 8% on a global basis, compared with an increase of 2% a year earlier and the 12% growth logged for the previous quarter (WALL STREET JOURNAL, 6/29). CNBC’s Landon Dowdy said Nike's "disappointing future orders" is a "key metric." She noted the figures for future orders were "slightly short of estimates" and the metric continues to be "closely watched by investors as a benchmark for demand for products over the next few months" (“Worldwide Exchange,” CNBC, 6/29). At presstime, shares of Nike were trading at $54.16, up 2.02% from the close of business yesterday (THE DAILY).
LOTS OF COMPETITION: CNBC’s Dowdy also noted Nike has cited a rise in online shopping in creating "excess inventory and this comes amid growing competition from other athleisure brands" such as Lululemon and UA. The sportswear industry also is "feeling the effects of the broader slowdown in the retail sector as consumers aren’t spending as much on apparel” (“Worldwide Exchange,” CNBC, 6/29). JPMorgan analyst Matthew Boss said Nike's recent performance has been less about competition and more about the "broad-based consumer being more picky in terms of what they are buying." Boss said of Nike's basketball issues, “It is signature basketball at Nike that has been the issue. Under Armour put out the Curry shoe -- absolutely on fire -- right price-point, right innovation and consumers flocked to it. If you look at Nike, they just relaunched the (Kevin Durant shoe) this week actually, completely sold out -- better price-point with the innovation behind it. LeBron’s shoe, it was off. It was more made to wear with jeans than it was to wear on the courts. The consumers saw it and there was a better alternative out there (“Squawk Box,” CNBC, 6/29). CNBC's Jim Cramer added, “In the last few weeks, the LeBron Soldier 10 and the Kyrie (Irving shoe) have been selling incredibly well" ("Squawk on the Street," CNBC, 6/29).
STICK WITH THE PLAN: In Portland, Jeff Manning notes Nike execs "remained bullish" despite the results. Nike President & CEO Mark Parker "stands by the company's stunning prediction last October" that Nike will hit $50B in sales by '20. Parker: "We remain confident in that long-term projection." Meanwhile, digital sales "were a strong point for the company." Nike Exec VP & CFO Andrew Campion said that Nike.com sales "showed double-digit or even triple-digit percentage growth in all of the company's geographic territories" (Portland OREGONIAN, 6/29). CNBC’s Cramer said Nike's direct-to-consumer business is "excellent" and inventory is "now lean." Cramer: "Do not forget The Sports Authority caused a major overhang in this country. Sports Authority has been a big drag on a lot of sporting goods companies. That goes away in the middle of July. Meantime, China (is) very strong, Western Europe (is) extraordinarily strong" ("Squawk on the Street," CNBC, 6/29).
