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Nike Delivers Weak Sales, Shares To Go Down

Published 03/22/2017, 12:54 PM
Updated 03/09/2019, 08:30 AM

On Wednesday’s market close, Nike (NYSE:NKE) delivered a worse-than-expected sales report that confirmed investor fears on the company’s declining U.S. business.

The weak sales in the past year have continuously dragged the company in the last six months in the middle of growing competition and lack of evidence on the recovery of the company’s cash flow.

Disappointing Sales And Weak Revenue

The sportswear giant reported earnings per share of 68 cents, beating consensus analyst estimates of 53 cents per share but missed revenue expectations of $8.47 billion at $7.9 billion for the quarter.

Although the revenue was up by 7% from the previous quarter, it was driven by sales and growth from China, Western Europe, and other emerging markets.

The retailer reported $8.43 billion total sales despite the growing competition from brands like Under Armour (NYSE:UAA) and Adidas (DE:ADSGN), particularly in the U.S. According to the company, the change in the prices of their products also has not been able to help their sales.

Nike Chief Executive Mark Parker announced on Tuesday that a number of factors have changed consumer patterns, most especially in North America. Despite this, Parker added that the company is now working on adjusting their operations that will meet the demands of their customers and will focus on directly engaging with their consumers.

The management also assured that the company is confident about the growth of their running and basketball business for the quarter most especially in their international markets. Nike, which has been doing business in China for the longest time, also projected a massive growth in the country in the coming months. Footwear and apparel segments in the country have risen by 14% and 22% respectively in terms of sales.

Despite the North American footwear and apparel segments rising by 3%, equipment sales have fallen by 16%.

Nike Shares

Prior to the release of the earnings report, investors and traders mostly position and bet that the shares of the brand would decline with short bets against Nike going up by 62% or by $774 million.

Over the past year, Nike shares have fallen by 8% and have lost as much as 3.76% during the after-hours trading upon the release of the earnings report. Nike’s stock is currently hovering around $58. Nike’s stock fell by 18% last year due to the changes they made in their retail sector. Nike also became the biggest loser in the Dow Jones index.

Nike’s gross margins also lost 140 basis points to 44.5% because of the pricier product costs and the changes in foreign exchange rates.

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