Saturday , 20 January 2018

Home » RESOURCES » MARKET » Nike Can Regain Stride After Results

Nike Can Regain Stride After Results

Nike is scheduled to report quarterly results Tuesday.
ENLARGE

Nike is scheduled to report quarterly results Tuesday.


Photo:

Bloomberg News

By

Miriam Gottfried

Sept. 26, 2016 2:16 p.m. ET

After weak results on the home court, Nike
NKE


-0.46
%




is playing defense in North America.

The sportswear giant’s revenues in the region decelerated during its fiscal fourth quarter ended May, coming in flat year over year. Even after adjusting for a timing shift from last year’s West Coast port delays, that was still a slowdown from the previous quarter.



Get financial insights and commentary on global investing from The Wall Street Journal’s Heard on the Street team. Subscribe to the podcast.

Increased competition in the basketball segment from rival Under Armour
UA


-0.47
%




was partially responsible. But lower-priced versions of its LeBron James and Kevin Durant basketball shoes may be helping it push back.

Accelerating same-store sales reported recently by Foot Locker
FL


0.03
%




and Dick’s Sporting Goods
DKS


-0.23
%




bode well for Nike’s North American business. The two retailers purchased 72% and 20% of merchandise, respectively, from the brand in fiscal 2015. Improvement in North America and its effect on bolstering Nike’s average selling price, along with conservative guidance for the quarter and a new partnership aimed at cutting manufacturing costs, could help investors regain confidence in the company’s profit trajectory.

Analysts expect Nike on Tuesday to report fiscal first-quarter earnings of 56 cents a share on revenue of $8.9 billion. That compares with per-share earnings of 67 cents on revenue of $8.4 billion in the year-ago quarter. Nike itself said its gross margin would fall by 1 percentage point in the quarter, driven mostly by currency effects, and that revenue would climb only mid-single digits year over year. Many analysts say that guidance sets up an easily clearable hurdle.

Meanwhile, Nike is working to cut costs. In August it announced a partnership with private-equity firm Apollo Global Management.
APO


-0.11
%




 As part of the agreement, a new company was formed to purchase Nike’s existing apparel suppliers in North and Central America. This will increase manufacturing capabilities in those regions and shorten lead times.

Granted, Nike’s “futures orders,” which reflect products scheduled for delivery, tend to decelerate after the Olympics. Stronger competition from Under Armour, Adidas
ADDYY


-0.84
%




and Puma
PMMAF


-0.82
%




also remains a risk. But Nike is well aware by now of the need to develop new products to maintain and grow its share. And its challenges may already be priced in. At 21.6 times forward earnings, Nike shares now trades just below their five year average multiple.

Investors won’t have to jump quite so high to score.

Write to Miriam Gottfried at [email protected]

Let’s block ads! (Why?)

Receive News & Ratings Via Email - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings with MarketBeat.com's FREE daily email newsletter.

Nike Can Regain Stride After Results Reviewed by on . ENLARGE Nike is scheduled to report quarterly results Tuesday. Photo: Bloomberg News By Miriam Gottfried Miriam Gottfried The Wall Street Journal CANCEL Biograp ENLARGE Nike is scheduled to report quarterly results Tuesday. Photo: Bloomberg News By Miriam Gottfried Miriam Gottfried The Wall Street Journal CANCEL Biograp Rating:
scroll to top