NKE Nike Inc

By Sara Germano and Tess Stynes 

Nike Inc.'s long streak of strong growth on its home turf stalled in the latest quarter.

The sportswear and sneaker giant's profit fell 2% and sales were flat in North America, as the company continued to clear excess inventory and battled increased competition from Under Armour Inc. and Adidas AG. Overall revenue rose 6% in the quarter ended May 31, driven by gains overseas, but the results disappointed analysts.

Shares of the Beaverton, Ore., company fell 3.8% to $51.05 in after-hours trading. Before Tuesday's results, the stock price had fallen 15% in 2016.

Andy Campion, Nike's chief financial officer, said the company faced a tough comparison to the year prior. "We continue to see strong underlying momentum in the fundamentals that drive our growth and profitability," Mr. Campion told investors on a conference call.

Futures orders for North America increased 6% for products scheduled for delivery over the next six months. That compared with growth of 13% a year earlier and an increase of 10% in the previous quarter.

For the first time, Nike broke out sales of its Jordan Brand segment, the eponymous sneaker and apparel line for basketball star Michael Jordan. Jordan sales rose 18% to $2.8 billion for the fiscal year ended May 31, while Nike brand basketball sales fell 1% to $1.4 billion.

Analysts have been concerned about Nike's performance in North America and in basketball in particular, with several downgrading price targets on the company's stock in recent weeks. Nike has faced increased competition at home from Adidas, which has been pushing retro shoes, and Under Armour, which has an endorsement deal with NBA star Stephen Curry.

"Other brands are providing solid competition across multiple categories and I feel that is having an affect on the Nike numbers domestically," said Neil Schwartz, vice president of business development for industry tracker SportsOneSource. "Adidas came out of nowhere in the classics and casual athletic categories."

For the quarter ended May 31, Nike reported a profit of $846 million, down from $865 million a year earlier. Revenue was $8.24 billion, up from $7.78 billion a year earlier. In North America, revenue edged up 0.1% to $3.74 billion.

Nike said futures orders, which reflect products scheduled for delivery from June through November, rose 8% on a global basis, compared with an increase of 2% a year earlier and the 12% growth logged for the previous quarter. Futures orders are closely watched by investors as a benchmark for demand for Nike products.

Gross margin fell to 45.9% from 46.2%.

Nike has used expensive sponsorships to increase its market share in sports such as soccer and basketball. In the latest period, Nike increased such spending -- called demand creation -- by 6.6% to $873 million.

Write to Sara Germano at sara.germano@wsj.com and Tess Stynes at tess.stynes@wsj.com

(END) Dow Jones Newswires

June 28, 2016 19:12 ET (23:12 GMT)

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