Nike Shares Slump Despite Q3 Earnings Beat


NIKE, Inc. (NYSE: NKE) shares tumbled in the extended trading session on Thursday after the sportswear giant forecast announced earnings that surpassed the expectations of Wall Street analysts. Gross margin expansion, strong revenue growth, a lower average share count, and lower effective tax rate were the key drivers behind Nike’s earnings beat.

NKE stock ended Thursday’s regular session 1.5% higher at $88.01, before losing 3.6% to $84.82 in after-hours trading. The stock has climbed about 18% year-to-date and more than 30% on year-over-year basis.

NKE Earnings

Nike reported fiscal 2019 third-quarter earnings of $1.1 billion, or $0.68 per share, up from a loss of $921 million, or $0.57 per share, in the same period a year earlier. On average, analysts surveyed by Refinitiv had predicted adjusted earnings of $0.65 per share.

Group revenues, the company said, increased 7% to $9.6 billion from $9 billion in prior-year period. Analysts had also called for Q3 2019 revenues of $9.6 billion, based on figures compiled by Refinitiv.

Greater China sales came in at $1.59 billion, smashing analyst estimates of $1.53 billion. However, sales of $3.81 billion in its North America segment fell short of $3.89 billion expectations. Sales in Europe, Middle East and Africa were up 6%, down from 8% in second quarter, while Latin America and Asia Pacific sales grew 3%, up from 2% in Q2.

Administrative and selling expense were pegged at $3.1 billion, up 12%. Nike said inventories were $5.4 billion, up 1% from the same three months a year ago. The company did not provide outlook in its earnings statement.

Nike Executive Comments

“In Q3, our team once again drove strong, healthy growth across NIKE’s complete portfolio,” said Mark Parker, Chairman, President and CEO, NIKE, Inc. “Our business momentum is being accelerated by our ability to scale innovation at a faster pace and expand new digital consumer experiences around the world.”

“The Consumer Direct Offense is delivering broad-based growth across all four of our geographies, led by continued momentum in China,” said Andy Campion, Executive Vice President and Chief Financial Officer, NIKE, Inc. “We will continue investing in key capabilities to drive NIKE’s digital transformation and fuel strong profitable growth into next fiscal year and beyond.”

Nike Inc. Profile

Nike is the world’s largest designer and wholesaler of athletic footwear and apparel. The firm sells through more than 20,000 accounts and 110,000 retail doors, including a network of more than 1,182 company-owned stores (about 30% of revenue including online sales), and independent distributors and licensees in 170 countries.

Nike brand sales in North America account for 41% of revenue, followed by Europe, Middle East, and Africa (26%), Asia-Pacific and Latin America (14%), and China (14%). The Converse brand accounts for 5% of sales.