Nike's 2nd-Quarter Earnings Rise on Solid Digital Sales

Shoe manufacturer releases quarterly report

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Dec 21, 2018
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Nike Inc. (NKE, Financial) reported its second-quarter financial results on Dec. 20. The company's earnings and revenue beat expectations as a result of robust e-commerce operations and strong worldwide sales.Â

Key metrics

The athletic apparel and footwear giant posted earnings of 52 cents per share on $9.37 billion in revenue, beating expectations of $9.18 billion. The gross margin inched up 80 basis points to 43.8% due to a rise in the average selling price as well as margin growth in Nike Direct, which was only partially offset by higher product costs.

Segment details

In North America, the company witnessed 9% sales growth to $3.78 billion, boosted by double-digit sales growth in the Jordan brand. Online transactions grew 30% year over year.

Revenue surged a combined 8% to $2.31 billion in Europe, the Middle East and Africa. Sales in Asia-Pacific and Latin America went up 2% to $1.3 billion.

Despite volility from the ongoing trade war, the company’s revenue in China grew 26% to $1.54 billion, marking its 18th successive quarter of double-digit sales growth as a result of "incredibly strong demand for products."Â

Efforts

During the quarter, the company overhauled its production and retail policy.

It plans to deploy more resources in key areas like innovation, speed and direct-to-customer approach as part of its Triple Double campaign. This means Nike would focus more on generating revenue through its app and website while simultaneously reducing its business connection with some retailers.

The sneaker giant saw double-digit sales growth across the globe for both apparel and footwear, with most of the demand coming from women. As a result, it plans to expand its product portfolio in the footwear and apparel department.

Looking ahead

For the year, Nike said it expects revenue to grow in the lower double-digit percentage. Gross margins are projected to jump 70 basis points, up from its previous forecast of 50 basis points.

Disclosure: I do not have any positions in the stocks mentioned.

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