Moments ago Nike reported Q1 earnings which beat on the top and bottom line, with EPS of 67c beating the estimate of 63c (with a 14% tax rate), on revenue of $9.95BN, also just above the $9.94BN, if not quite above the high end of the forecast range which stretched to $10.20BN.
This is for Nike’s quarter ended August 31, which closed just a few days before the company announced its ad featuring Colin Kaepernick.
And yet, the stock reaction was rather negative, and that is being attributed to some on the modest miss in the Q1 gross margin which printed +44.2%, just below the consensus estimate of +44.3%. As Bloomberg notes, “gross margins are particularly important because Nike’s biggest long-term focus is lessening the company’s reliance on retail partners by strengthening sales via its own channels. Sales made on Nike’s website and app have much better margins and give the brand more control over its product.”
Furthermore, a geographic breakdown of revenue shows that while revenues came in stronger than expected in North America and EMEA, they missed in China and Asia Pacific/Latin America, as follows (courtesy of Bloomberg)”
While investors were focused on the China miss, Nike also posted its second straight quarter of growth in its home, North American market, with sales there rising 6% over the same quarter last year. That’s important for Nike, which is coming off a year-long slump in the region.
Nike also reported inventories of $5.2 billion, which unlike the build in prior periods was flat year over year, “primarily driven by a clean marketplace with healthy inventories across all geographies due to strong full-price sell-through on new innovation.”
