U.S. Markets open in 2 hrs 32 mins

Key Takeaways From Nike's 1st-Quarter Results

Nike Inc. (NYSE:NKE) released its first-quarter results after the market closed on Sept. 24. The company's earnings and revenue surpassed Refinitiv's expectations thanks to robust footwear and apparel sales. Results were also boosted by strong sales of back-to-school products and robust online sales.

By the numbers

The company, which is known for its athletic shoes and apparel, posted earnings of 86 cents per share, up 28% from the prior-year quarter. Revenue grew 7% to $10.7 billion. Analysts were anticipating earnings of 70 cents per share on $10.44 billion in revenue.


During the quarter, Nike's gross margin rose to 45.7% on the back of higher average selling prices as well as a bigger margin in NIKE Direct, which was only partly offst by mounting product costs and an adverse impact from foreign currency exchange rates.

At quarter-end, cash and cash equivalents and short-term investments stood at a combined $3.6 billion.

"Our strong start to FY20 highlighted the depth and balance of Nike's complete offense," Chairman and CEO Mark Parker said. "Nike's strong product innovation, combined with our industry-leading digital experiences, continue to deepen our consumer relationships around the world."

Performance in North America and China

In North America, sales grew 4% in the first quarter to $4.29 billion. This, however, fell short of estimates of $4.36 billion.

Sales in Greater China jumped 22% year over year as sales of footwear, apparel and equipment rose 22% each. The results show the company has managed to strengthen its position in China despite the ongoing trade war.

Digital sales

Nike reported 42% growth in digital sales in the first quarter on the back of "mobile and app experiences."

Chief Financial Officer Andy Campion said Nike has shifted to cloud-based architecture, which has helped the company enhance its digital offerings at a faster pace.

"Our targeted strategic investments are accelerating NIKE's digital transformation and extending our competitive advantage,"he added. "Even amidst the increasingly volatile macroeconomic and geopolitical environment, we expect our unrelenting focus on better serving the consumer to continue fuelling strong, broad-based growth across our global portfolio."

Financial forecast

For full-year 2020, the footwear and apparel giant is expected to report earnings of around $2.73 to $3 per share. Sales are expected to grow at a high-single-digit range to $42.09 billion. The company sees gross margin growth of 50 to 75 basis points.

Disclosure: I do not hold any positions in the stocks mentioned.

Read more here:



Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.

This article first appeared on GuruFocus.