Coverage: Nike’s shares rise after strong earnings

Athletic shoe and clothing manufacturer Nike saw its earnings rise more than 3 percent on Tuesday after it reported earnings that were much better than Wall Street expectations.

Elaine Low of Investor’s Business Daily had the news:

Nikemanagement sounded extremely bullish late Tuesday after Q2 earnings per share rose vs. forecasts for the first decline in more than four years, following recent investor bearishness and concern over its “futures” orders growth.

Shares have tumbled over 17% in 2016, making it the worst performer on the Dow Jones industrial average by far, amid retail choppiness and an increasingly crowded athletic apparel market. Under Armour and Adidas continue to challenge the sports apparel titan; the latter in particular has seen a resurgence in popularity in the U.S.

But the plan is to grow both Nike and the overall marketplace, and Nike Brand President Trevor Edwards said on the company’s conference call that there is “tremendous potential” in North America.

The company also is seeing “incredible momentum” in its basketball business, which was the subject of some investor worry, and momentum is solid in China, he added.

Krystina Gustafson of CNBC.com noted the growth came despite the rise of athleisure wear:

The industry leader in athletic apparel and footwear is facing a slew of pressures, including the rise of Under Armour. As the popular athleisure style pivots from performance gear to retro fashion, German brand Adidas is also gaining share. There are also broad concerns that the athleisure trend has peaked.

High inventory levels and The Sports Authority bankruptcy are likewise weighing on Nike’s revenues and future orders. These orders refer to goods that have been requested by wholesale customers, but were not delivered during the quarter.

Future orders have traditionally been considered a gauge for future demand. But last quarter, Nike said it would no longer provide this figure in its earnings releases, as a shift in selling to the web and in its branded stores has made this metric less relevant. Instead, it will detail this information on a call with analysts to provide additional context.

Future orders in North America grew at their worst rate in more than six years during the prior three-month period.

Chris Lange of 24/7WallSt.com noted that Nike also had strong growth from its Converse brand:

Revenues for the Converse brand were $416 million, up 5% on a currency neutral basis, driven by strong growth in North America.

The company did not reference its futures orders in the earnings report, instead these will be discussed on the conference call.

During the second quarter, Nike repurchased a total of 17.0 million shares for roughly $900 million as part of the four-year, $12 billion program approved by the Board of Directors in November 2015. So far only $3.1 billion of the repurchase plan has been exercised.

Cash and short-term investments totaled $5.9 billion, which was about $173 million less than the same period from last year.