Nike earnings: 50 cents per share, vs. expected EPS of 43 cents

Nike beats on top & bottom lines

Nike shares erased most of their after-hours gains Tuesday evening, after better-than-expected sales and earnings results had initially sent the stock more than 5 percent higher.

The pullback occurred after management said that Nike's future orders grew just 2 percent on a constant currency basis, including a 4 percent contraction in North America. That's despite the company's best efforts to shift investors' focus away from this metric, which has traditionally been used to gauge future demand.

Future orders refer to goods that have been requested by wholesale customers, but were not delivered during the quarter. Last quarter, Nike said it would no longer provide this figure in its earnings releases, as a shift in selling to the web and in its branded stores has made the metric less relevant.

That advisory didn't stop investors from reacting to its shortfall, which analysts had expected to increase 5.2 percent on a currency neutral basis, according to a FactSet.

Nike's stock was trading some 2 percent higher, near $53, shortly after its call with investors.

"The key takeaway is that our revenue guidance reflects a much more comprehensive outlook for our business," Andy Campion, Nike's CFO, reiterated.

The company confirmed that it expects full-year revenue to grow in a high-single-digit range.

Nike president and CEO Mark Parker.
Jewel Samad | AFP | Getty Images

Nike's fiscal second-quarter sales were fueled by strength across global markets, in both footwear and apparel. Revenue rose 6 percent to $8.18 billion, topping the Thomson Reuters consensus forecast of $8.09 billion.

Earnings per share came in at 50 cents, adjusted, topping the consensus estimate that called for a 43 cent per share profit.

In the prior-year period, the company earned 45 cents a share on $7.69 billion in revenue.

"We are well-positioned to carry our momentum into the back half of the fiscal year and beyond," CEO Mark Parker said in the company's press release.

Nike's earnings got a boost from smaller selling and administrative expenses and a lower average share count. During the three-month period, Nike repurchased 17 million shares for approximately $900 million.

Yet its gross margin took a hit, as price increases weren't enough to make up for foreign exchange headwinds and an uptick in sales at off-price stores. Removing the impact of currencies, Nike's revenue grew 8 percent.

In North America, which accounts for roughly half of the Nike brand's sales, revenue increased 3 percent. And with inventories now dialed back, the company expects the gross margin in its largest market to return to expansion in the second half.

Direct-to-consumer sales, which include Nike.com and its branded stores, shot 23 percent higher.

Nike's stock has been a rare laggard on the Dow Jones Industrial Average this year, falling almost 18 percent. That's despite a nearly 15 percent rise in the Dow, which ticked closer to 20,000 Tuesday.

The industry leader in athletic apparel and footwear is facing a slew of pressures, including the rise of Under Armour. As the popular athleisure style pivots from performance gear to retro fashion, German brand Adidas is also gaining share. There are also broad concerns that the athleisure trend has peaked.

The Sports Authority bankruptcy has also weighed on Nike's revenues. It's combating industry consolidation, in part, by increasing its network of stores, including a massive flagship that recently opened in New York City.

"In 2017 we will stay on offense," Nike President Trevor Edwards said.