Nike sales, future orders rise less than expected; shares drop
today Jun 28, 2016
Nike Inc's quarterly revenue rose less than expected and its forecast for orders growth also missed analysts' estimates, showing that the U.S. sports giant was struggling to fend off competition from Germany's Adidas and others.
Shares of the world's largest footwear maker tumbled 7 percent to $49.33 in extended trading on Tuesday.
While Nike still dominates in North America, its biggest market, analysts have said that it is losing ground to Adidas, while smaller domestic rival such as Under Armour Inc are also making inroads.
"You are seeing more people moving towards Adidas," Edward Jones analyst Brian Yarbrough said. He said Adidas was "making a comeback" and some U.S. retailers were giving more shelf space to Nike's competition.
Nike's revenue in the fourth quarter was also hit as a strong dollar ate into sales from some overseas markets and as it cleared excess inventory in North America.
The company's orders for delivery from June through November in North America, a demand gauge it calls "futures orders", also fell short of expectations, signaling a slowing pace of growth in its biggest market.
Nike's futures orders in the region were up were up 6 percent at the end of the fourth quarter, while analysts were expecting a 9 percent growth, according to Consensus Metrix.
The futures orders at Nike, which owns the Jordan and LeBron range of basketball shoes, were hurt by weak basketball shoes sales, the main reason for which was the Steph Curry brand of shoes being sold by Under Armour, Yarbrough said.
Nike's revenue rose nearly 6 percent to $8.24 billion in the fourth quarter ended May 31, while analysts on average had expected revenue of $8.28 billion, according to Thomson Reuters I/B/E/S.
The company's sales in North America were flat, weighed down by a fall in sales of apparel and equipment. Footwear sales, its biggest revenue contributor, rose 2 percent.
Nike's total net income fell to $846 million from $865 million. On a per share basis, profit was flat at 49 cents, and a penny higher than analysts' estimates.
The company said gross margins dropped 30 basis points to 45.9 percent as higher average selling prices were more than offset by higher product costs, the hit of clearing excess inventory in North America and unfavorable foreign exchange rates.
Shares of the company, which sponsors athletes like Lebron James, tennis player Roger Federer, Portuguese footballer Cristiano Ronaldo, have fallen nearly 15 percent this year.
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