Nike earnings beat, sales rise, as Jordan brand hits $1 billion

Key Points
  • Nike's quarterly earnings and sales top analysts' estimates.
  • The company calls out strength in its Jordan brand.
  • But sales growth in North America comes in slightly weaker than expected.
Valentyn Ogirenko | Reuters

Nike on Thursday reported quarterly earnings and sales that beat analysts' expectations, as more customers flocked to its stores for limited-edition Jordan sneakers and ordered athletic apparel from its website.

The company said its Jordan brand had its first ever billion-dollar quarter, thanks to new innovation and a spike in interest in the basketball-focused label, including among women and in markets outside the U.S.

But the retailer's shares fell more than 2% in after-hours trading on the news, having hit an all-time intraday high earlier in the day. Nike's growth on its home turf in North America came in slightly weaker than expected.

Here's how Nike performed during the latest quarter compared with what analysts were expecting, based on Refinitiv data:

  • Earnings per share: 70 cents vs. 58 cents expected
  • Revenue: $10.33 billion vs. $10.09 billion expected

"I've never been more optimistic about the future of this company," CEO Mark Parker said.

Net income rose to $1.12 billion, or 70 cents a share, in the second quarter ended Nov. 30, from $847 million, or 52 cents per share, a year ago. That was better than the 58 cents analysts were expecting, based on Refinitiv data.

Revenue was up about 10% to $10.33 billion from $9.37 billion a year ago, beating expectations for $10.09 billion. Nike said it saw strength across all geographies. And it said digital sales were up a whopping 38%, thanks to a boost at the start of the holiday shopping season. It said online sales surged more than 70% in North America on Black Friday.

But sales in North America overall still came up short. They climbed 5.3% during the period, reaching $3.98 billion. Analysts were calling for sales of $4 billion.

Nike also blamed tariffs for higher product prices, which weighed on profitability. Gross margins rose 20 basis points to 44%, slightly less than expectations for 44.1%.

Nike in October abruptly announced that Parker will be stepping down in January. He will be replaced in 2020 by John Donahoe, a current Nike board member and formerly the CEO of eBay. Parker, meantime, is set to become Nike's executive chairman, having worked at Nike for four decades.

Parker explained to CNBC at the time that Donahoe will be able to help Nike focus more on digital growth, considering his professional background.

Parker told analysts on Thursday that "this has been a thoughtful transition that has been planned for many months."

Nike has been investing more recently in boosting its online operations, which include its mobile apps, such as SNKRS, and driving sales at Nike stores. It has been narrowing its base of wholesale partners and focusing on key accounts, such as with Foot Locker, Nordstrom and Dick's Sporting Goods. Nike in November said it was no longer going to sell clothes and shoes directly to Amazon — an initiative it had been testing since 2017.

Nike's direct sales were up 17% during the quarter.

Nike said footwear sales in North America, excluding any impacts from currency changes, were up 8% during the latest period, while apparel sales rose 1% and equipment sales were up 6%.

Total sales in Greater China, excluding currency impact, grew 23% to $1.85 billion, topping estimates for $1.80 billion.

Nike has said the Greater China region remains one of its greatest opportunities for growth moving forward, despite the civil unrest in Hong Kong and an ongoing trade war between the U.S. and China.

Meanwhile, a damning op-ed in The New York Times in November called attention to alleged abuse toward women that took place at Nike's Oregon Project under track coach Alberto Salazar. The team was previously considered to be the best in the world.

Nike said last month that it takes "the allegations extremely seriously" and that it was launching "an immediate investigation to hear from former Oregon Project athletes."

However, the fallout has extended even to Nike's own staff. Hundreds of Nike employees marched in protest of the company's treatment of women at its headquarters earlier this month.

Looking to the full year, Nike said it is calling for revenue, on a currency neutral basis, to rise close to a low double-digit rate. Analysts had been calling for 8% growth.

Nike shares, as of Thursday's market close, are up more than 36% this year. The company is valued at roughly $157.9 billion. The stock on Thursday hit an all-time intraday high of $101.27.

Read Nike's full earnings release here.

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