Nike Inc. (NKE, Financial), a major sports apparel company, said fiscal first-quarter revenues for the three months ended Aug. 31 remained flat from the corresponding period last year.
The Beaverton, Oregon-based company reported strong revenue growth in international markets even though North America sales declined 3% year over year.
Company realigns geographic operating segments, delivers strong sales growth
On Sept. 25, Nike realigned its geographic operating segments with its launch of the Consumer Direct Offense to the following regions: North America, Europe, Middle East and Africa (EMEA), Greater China and Asia Pacific / Latin America. Among these regions, Greater China revenues increased 9%, driven by strong momentum in the company’s “2X direct” approach. CEO Mark Parker said the approach allowed Chinese customers to purchase Nike products through social media platforms, driving company revenues in the region. According to Chief Financial Officer Andy Campion, the "Jordan Basketball Experience" platform located in China's Tmall further boosted sales.
Apparel sales significantly increased across all international regions due to several factors, including the launch of “Flynet” and the Jersey Basketball Experience. Parker mentioned new Flynet technology spurred innovation in women’s apparel, one major component of the 2X innovation strategy. Trevor Edwards, Nike brand president, explained the Jordan Basketball Experience during the earnings call, mentioning NBA players can directly connect with fans through the digital platform.
North America sales momentum increased despite lower growth
Even though wholesale revenues declined, North American sales momentum increased as company management detailed new initiatives in managing the marketplace. Nike continued leveraging its strong brand through strategic partners like Dick’s Sporting Goods Inc. (DKS, Financial) and Foot Locker Inc. (FL, Financial). Nike’s digital products, which include the mobile app and Nike.com, facilitated the connection between the customer and the company brand.
The company’s continued sales momentum contributed to strong profit margins, including operating margins that outperform over 85% of global competitors. GuruFocus ranked Nike’s business predictability 4.5 stars, suggesting consistent revenue and earnings growth over the past 10 years.
Disclosure: The author has no positions in the stocks mentioned.
