Nike reported a "monster" Q1, having "flirted with" $10B in revenue and handily surpassing $1B in earnings, according to Jeff Manning of the Portland OREGONIAN. The company posted adjusted earnings after the markets closed yesterday of $1.1B on revenues of $9.95B, "handily beating Wall Street's consensus prediction." Nike sales "grew in each of the company's global territories," even showing 5% growth in North America, which had been a "weak spot" last year. Nike Exec VP & CFO Andrew Campion said that digital sales was the "fastest-growing channel in each geographic territory." Nike "started a national furor" when it unveiled an ad campaign featuring Colin Kaepernick this month, but the campaign was launched "after the Aug. 31 close of the fiscal first quarter and had no effect on the company's quarterly performance" (Portland OREGONIAN, 9/26). CNBC.com's Lauren Thomas noted Nike in Q1 "showed more signs that investments were starting to pay off." North American sales had their "second consecutive quarterly increase." Execs said that total apparel sales "surged" 11%, footwear was up 10% and digital sales "soared" 36%. This also was the first full quarter since Nike Chair, President & CEO Mark Parker "apologized in May for missing a sexual harassment scandal that rocked" the company and "cleared out several senior executives this year" (CNBC.com, 9/25). At presstime, shares of Nike were trading at $83.50 per share, down 1.52% from the close of business yesterday (THE DAILY).
DIGITAL FOCUS: The WALL STREET JOURNAL's Khadeeja Safdar notes Nike has been "expanding its e-commerce sales." The company said that its efforts to "reach customers through its own apps and stores paid off" in Q1. Over the past year, Nike has "cut back the number of retailers it focuses on" and also started selling products through Amazon. Parker said that the company's "move to narrow" the focus on retailers like Nordstrom and Foot Locker is "driving higher growth rates." Parker also highlighted a new L.A. store which "changes its products based on what's trending with shoppers in the local area." Nike said that it has been "successfully capitalizing on key moments in sports," noting that both teams in the World Cup final -- France and Croatia -- were sponsored by Nike (WALL STREET JOURNAL, 9/26). SW Retail Advisors President Stacey Widlitz said Nike has “clearly had a turnaround in North America,” and it is “clearly product driven” (“Worldwide Exchange,” CNBC, 9/26). CNBC’s Sara Eisen said Nike’s big picture is going to be “driven by innovation, a lot of investment in their direct-to-consumer business, especially digital, and what that equals … is higher margins.” Eisen: “That is something to get excited about” (“Squawk on the Street,” CNBC, 9/26).
THEY'RE WITH KAEP: Parker said that Nike execs are "proud" of the company's campaign with Kaepernick, adding that it "strongly resonated with customers around the world and drove a record engagement on social media." Parker also said that company execs feel "very good and very proud of the work" -- having introduced "Just Do It" to a new generation of customers on the slogan's 30th anniversary. Analysts said that the campaign should "ultimately boost sales and momentum" around Nike. CNBC.com's Thomas noted the ad, which features athletes like Serena Williams and LeBron James, has "drawn record likes on social media." While some analysts said that the campaign was "risky," others said that "risky moves are necessary to stay relevant and ahead of peers" (CNBC.com, 9/25). B. Riley FBR Senior Research Analyst Susan Anderson said the Kaepernick campaign “ended up being a positive for Nike,” which contributed to the “run” of Nike stock. Anderson said, “People are taking a step back and saying, ‘It’s only been a few weeks, we’ll wait and see how positive it is for sales over the long-term.” Anderson also said Nike “jumped on the innovation bandwagon” with both their stores and products (“Squawk Box,” CNBC, 9/26). The WALL STREET JOURNAL's Elizabeth Winkler notes though analysts expect the Kaepernick campaign to "translate to higher sales," whether it actually does, and by how much, "remains to be seen" (WALL STREET JOURNAL, 9/26). Susquehanna Int’l Group Senior Research Analyst Sam Poser said every time the media talks about Nike’s Kaepernick campaign, it is “another positive hit” for the company. Poser said, “People get caught up on one quarter, but really if you look at inventory, margins, spend and overall brand positioning, it looks as good as it ever has” (“Squawk Box,” CNBC, 9/26).
