Nike earnings, sales top Wall Street's expectations for 1Q 2020
Nike (NKE) reported fiscal first-quarter 2020 results that handily topped consensus expectations, driven by a push toward direct-to-consumer and digitally focused sales strategies.
Here were the main results from the report, versus consensus estimates compiled by Bloomberg:
Revenue: $10.7 billion vs. $10.44 billion expected
Adj. earnings per share: 86 cents vs. 70 cents expected
Shares of Nike jumped more than 5% to $91.80 each as of 4:29 p.m. ET after earnings were released.
Nike’s North American segment – its biggest contributor to total sales – saw $4.29 billion in quarterly revenue, representing an increase of 4% over last year. This, however, came in just short of consensus estimates for $4.36 billion. Greater China sales continued to grow by double digit percentages during the quarter, climbing 22% to an estimates-topping $1.68 billion.
“Our strong start to FY20 highlighted the depth and balance of Nike’s complete offense,” Nike CEO Mark Parker said in a statement. “Nike’s strong product innovation, combined with our industry-leading digital experiences, continue to deepen our consumer relationships around the world.”
The results come on the heels of a rare earnings miss for Nike in its final fiscal quarter of 2019. The company had attributed this to increased marketing expenses and a higher tax rate during the period.
But highly anticipated new product launches and solid results for continuing lines – along with an ongoing effort to draw new customers to the Nike SNKRS app – presaged a turnaround for the reported quarter.
In the three months to the end of August, Nike released the performance-focused Nike Joyride Run Flyknit, as well as Siri-enabled self-lacing shoes. Legacy Nike products including the Air Max line continue to perform well, according to Cowen data and commentary from management at FootLocker (FL), which sells Nike products.
In a fourth-quarter call with investors, Nike’s management had dismissed concerns that U.S.-China trade tensions were harming the business. CFO Andrew Campion said that the company had “not seen any impact on our business to date” as of June, while CEO Mark Parker said consumer sentiment in China around Nike remained “quite strong.”
Nike’s management reiterated this optimism Tuesday.
“Even amidst the increasingly volatile macroeconomic and geopolitical environment, we expect our unrelenting focus on better serving the consumer to continue fueling strong, broad-based growth across our global portfolio,” Campion said in a statement.
However, these remarks come as another round of tariffs was implemented at the start of September, which impacted consumer goods including apparel and footwear. Even so, some analysts have suggested that Nike retains enough pricing power to offset the impact of additional tariffs.
“We believe Nike can effectively manage List 4 tariffs due to a sophisticated supply chain and leverage with vendors,” Telsey Advisory Group analyst Cristina Fernández wrote in a note last week.
“Looking forward, we remain positive on Nike as we continue to view it as a winner in the consumer/retail landscape with the ability to drive continued strong sales growth and gross margin improvement through product innovation, inventory management, more direct customer engagement and elevated experiences digitally and in stores,” she said.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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