Post Earnings Coverage as Nike Posts Mix Results

LONDON, UK / ACCESSWIRE / June 29, 2016 / Active Wall ST announces its post-earnings coverage on Nike, Inc. (NYSE: NKE). The company announced its Q4 FY16 financial results after the markets closed on Tuesday, June 29, 2016. The sportswear giant beat earnings expectations, but revenue and futures orders fell slightly short of estimates, renewing concerns that growth in the world’s largest sports brand will be stunted amid increased competition. Register with us now for your free membership and see our complete earnings coverage on this equity at:

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Earnings Reviewed

For the quarter ended on May 31, 2016 the Beaverton, Oregon-based company posted diluted earnings of $0.49 per share on $8.24 billion in revenue. Earnings per share were flat from the year ago period, while revenue climbed 6% from$7.78 billion in Q4 FY15. Analysts expected Nike to report earnings of $0.48 per share on revenue of $8.28 billion.

Nike’s revenue of $3.74 billion from North America was flat from the year ago period. Revenue grew 19% and 18% on a y-o-y basis in Western Europe and Greater China, respectively. Japan’s revenue climbed 22% on y-o-y basis, while emerging markets sales declined 7%. Excess inventory issues in North America weighed on Nike’s Q4 FY16 gross margin, which dipped 30 basis points to 45.9%; this was also impacted by higher product costs and unfavourable exchange rates.

At the end of Q4 FY16, global futures orders for Nike products scheduled for delivery from June to November 2016 totalled $14.9 billion, an 8% increase on y-o-y basis and 11% higher on a currency neutral basis. This is a closely watched metric as it provides an indication of demand for Nike’s products in coming months. Orders in Japan are up 24% on y-o-y basis while it is up 18% in greater China. Meanwhile, orders from North America were up just 6% on y-o-y, the first time it has dipped into single digits since Q3 FY14 amid increased competition with sportswear titans such as Adidas and Under Armour Inc. (NYSE: UA).

Challenging Environment

After years of scorching growth, Nike is facing a number of challenges. Revenue in overseas market has been impacted by strong U.S. dollar, while competition in footwear market is heating up. Under Armour has been able to make progress in Nike’s long time stranglehold of the basketball shoes, while Adidas is increasing its market share in the sneaker segment. Nike basketball sales, other than Jordan Brand, declined 1% in Fiscal 2016 while Nike’s U.S. footwear overall rose just 2% in Q4 FY16, compared to a 16% rise in Q3 FY16. Nike has also been hampered by bankruptcy of Sports Authority and Eastern Mountain Sports stores in 2016 on which Nike relies heavily to sell its products.

Outlook

On the earnings conference call, Nike’s management said full-year expectations are “largely unchanged” from a growth and profitability perspective, in spite of the recent volatility spurred by the Brexit.

Share Buyback

During Q4 FY16, Nike repurchased a total of 9.0 million shares for approximately $540 million as part of its four-year, $12 billion program authorized by the board of directors in November, 2016.

Stock Market Performance

On Tuesday, June 28, 2016, Nike’s stock was up 2.31%, closing at $53.09 for the day. The stock recorded trading volume of 19.59 million, which was higher than its 3-month average volume of 9.92 million. Nike’s stock has declined 14.59% on YTD basis. In 2015, the company has topped gains in the Dow Jones Industrial Average with the stock advancing 30%.

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