Nike’s China sales are booming, as demand wanes in North America

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Nike delivered a mixed bag of results on Tuesday, posting strong sales growth in its international geographies, particularly China. But wholesale revenues continued to decline in North America into the fiscal first quarter.

In a competitive retail environment, Nike has been seen as racking up expenses, favoring discounts and heavy spending to grow its direct-to-consumer business.

Nike said on Tuesday, though, that it’s been working to cut costs, reporting that selling, general and administrative expenses fell 1 percent, to $2.9 billion, in the first quarter.

The athletic footwear and apparel retailer’s stock was falling more than 3 percent after market close on the news. Shares had initially climbed near 3 percent.

Here’s what Nike reported, compared to what Wall Street was expecting, based on a Thomson Reuters survey of analysts:

  • Earnings of 57 cents a share, excluding items, compared with a forecast profit of 48 cents per share.
  • Revenue was $9.07 billion, versus an estimate of $9.08 billion.

“This quarter, we captured near-term opportunities through our new Consumer Direct Offense,” CEO Mark Parker said in a statement.

“Looking ahead to the rest of fiscal 2018, we will ignite NIKE’s next horizon of global growth through the strength of our brand, the power of our innovative products and the most personal, digitally-connected experiences in our industry,” Parker added.

Nike’s first-quarter net income fell to $950 million, or 57 cents per share, from $1.25 billion, or 73 cents per share, one year ago. The 24 percent drop in quarterly profit could be attributed to gross margin decline, a higher effective tax rate and other expenses, Nike said.

Excluding certain items, Nike earned 57 cents a share, topping analysts’ estimate of 48 cents per share, according to a Thomson Reuters survey.

Total revenue was $9.07 billion, about flat when compared to the same period last year.

Revenue for the Nike brand was $8.6 billion, up 2 percent on a currency-neutral basis, while sales for Converse were $483 million, down 16 percent and driven lower by declines in North America, the company said.

Nike added that it repurchased a total of 15.3 million shares for about $849 million during the first quarter, part of its four-year, $12 billion buyback program, which was approved in 2015.

As of Aug. 31, 2017, Nike has repurchased 95 million shares under the program, for $5.3 billion. A lower average share count this quarter helped the company offset other expenses, Nike explained.

Looking to its product categories, Nike saw the highest sales, or $5.5 billion, in footwear. Nike’s apparel revenue came in at $2.7 billion for the quarter, while equipment revenue was $420 million.

In June, Nike revealed plans to cut about 2 percent of its global workforce, also trimming its geography segments from six to four: North America; Europe, Middle East and Africa; Greater China; and Asia-Pacific and Latin America.

Nike’s Greater China segment in the first quarter brought $1.1 billion in sales, up 9 percent from a year ago. North America sales came in at $3.9 billion, down 3 percent and weighing on Nike’s overall results.

“The decrease in revenue was a function of short-term promotional headwinds in the broader marketplace,” CEO Parker said on the company’s earnings conference call about Nike’s domestic sales.

Nike’s Asia Pacific & Latin America revenue rose 5 percent, while Europe, Middle East & Africa sales were up 4 percent for the quarter.



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