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Nike (New York Stock Exchange: NO) traded lower in pre-market activity on Friday after the company missed expectations on the EPS line for the first time in three years and put in dovish guidance. Margins were also down year-over-year, in part because of A Higher level of markdowns.
Revenue increased 16% in Greater China to $1.81 billion, exceeding consensus expectations of $1.64 billion and outperforming revenue growth recorded in Asia Pacific and Latin America (+5%), North America (+5%) and EMEA (+ 3%). Footwear revenue increased 7% to $8.55 billion versus $8.25 billion, while apparel revenue was flat year-over-year at $3.23 billion versus $3.25 billion. Equipment revenue increased 11% to $430 million. Nike Direct sales increased 15% to $5.5 billion on a reported basis vs. $5.13 billion, and were up 18% on a currency neutral basis. Reverse sales growth slowed during the quarter, with a decline of 1%.
For the full year, Nike (NKE) guided revenue growth at mid single digits against the 6.3% consensus and gross margin to expand 140 to 160 basis points.
During the earnings call, Nike (NKE) noted strong consumer demand, with traffic growing both online and in stores. CEO John Donahue noted that while Nike’s direct business (NKE) will continue to grow faster, the company will continue to expand its market strategy to enable access to as many consumers as possible by selectively adding wholesale partners.
On Wall Street, Deutsche Bank maintained a buy rating on Nike (NKE) after receiving its earnings update and guidance. The key to the exit from the print, analyst Gabriela Carboni said, is the company’s much-improved inventory positioning, which the company believes signals the beginning of easing promotional pressure across the sports space. Deutsche Bank was also encouraged by the company’s commitment to driving full rate growth in fiscal ’24 along with continued implementation of NKE within its DTC channel. The report is expected to ease investor concerns about the wholesale channel as well.
Jeffries also remained in the bull camp. Analyst Randall Kunick said the company continues to believe that Nike (NKE) is a best-in-class retailer and will continue to deliver strong performance as digital sales penetration expands, Greater China rebounds and product innovation accelerates.
Shares of Nike (NKE) fell. 3.03% in pre-market action to $109.94.
