Nike Inc. shares fell by 4 percent after it posted double-digit earnings growth for its fiscal first quarter as the company works to revive its business in the U.S. and courts controversy with a new ad campaign featuring former San Francisco 49ers quarterback Colin Kaepernick.
Lauren Thomas of CNBC.com had the news:
Its shares fell by more than 4 percent in after-hours trading Tuesday despite a 10 percent rise in revenue to $9.95 billion and 15 percent jump in profit to $1.1 billion that topped analysts’ estimates.
Nike showed more signs that investments were starting to pay off. North American sales climbed 6 percent during the quarter, their second consecutive quarterly increase. Total apparel sales surged 11 percent, footwear was up 10 percent and digital sales soared 36 percent, executives said.
“Digital was once again our fastest-growing channel in each and every geography,” Chief Financial Officer Andrew Campion told analysts on a conference call. The company’s been pouring money into new technology and is seeing some traction with its Nike mobile app as well as “explosive growth” in its SNKRS app, he said. It plans to invest more in consumer data and analytics as well as digital product design and production next year, he added.
Akin Oyedele of Business Insider reported that a lower gross margin caused the stock drop:
However, Nike’s gross margin was weaker than analysts had forecast, sending shares down by as much as 4% in after-hours trading. Gross margin increased by 60 basis points to 44.2%, thanks to higher average selling prices. But this was shy of the expectation for 44.3%. Sales in China and Latin America were also weaker than forecast.
Sales increased across all regions and brand categories except equipment.
Nike reported a second-straight quarter of positive footwear-sales growth in North America with a 5% increase. It competes against Adidas, Under Armour, and others in this category and posted negative growth from May 2017 through the second quarter.
“Nike’s Consumer Direct Offense, combined with our deep line up of innovation, is driving strong momentum and balanced growth across our entire business,” CEO Mark Parker said in the earnings release.
Mae Anderson of the Associated Press reported that Nike has benefitted from its edgy marketing:
But Nike has long boosted its global brand with edgy visual ads. On Monday, it celebrated another controversial athlete, Tiger Woods, who Nike stuck by during a 2009 sex scandal. Its latest campaign, a two-image Instagram ad celebrating Woods’s first PGA Tour win in five years, went viral. The first image shows his back, with the words, “He’s done.” But a swipe through to the second image shows the front of him giving a fist pump and the words “it again.”
The Kaepernick campaign included a print ad that featured a close-up of his face and the words, “Believe in something. Even if it means sacrificing everything,” as well as a TV ad that featured many Nike athletes and a voiceover by Kaepernick in celebration of the 30th anniversary of Nike’s “Just Do It” tagline. Kaepernick was the first NFL athlete to take a knee during the national anthem to protest police brutality.
People online were divided over the ads. Some burned their Nike socks and threatened boycotts while others saluted the company’s message. Overall, revenue hasn’t been dampened and the boycotts seem to have fizzled out. This week, in fact, a Rhode Island town council that had approved a nonbinding resolution to boycott Nike products reversed course .
In a call with analysts, Nike CEO Mark Parker said the campaign has inspired “record engagement with the brand,” and an uptick in traffic and engagement “socially and commercially,” although he did not give specifics.
