Nike's U.S. Growth Falters -- WSJ
June 29 2016 - 3:04AM
Dow Jones News
Company warns of slower pace in future orders sparking a drop in
share price
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 29, 2016 02:49 ET (06:49 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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