Nike Holiday sales reported Thursday beat expectations, helped by better-than-expected growth in North America.
Here’s how the company performed compared to Wall Street expectations, according to a survey of analysts by LSEG (formerly Refinitiv):
- Earnings per share: 77 cents, 74 cents expected
- Revenue: $12.43 billion, $12.28 billion expected
The company reported net profit of $1.17 billion, or 77 cents a share, for the three months ended Feb. 29, compared with $1.24 billion, or 79 cents a share, a year earlier. Excluding 21 cents per share related to restructuring charges, earnings per share would have been 98 cents, the company said.
Sales rose to $12.43 billion, slightly higher than the $12.39 billion in the same period last year.
In North America, where demand is unstable, sales rose about 3% to $5.07 billion, compared with estimates of $4.75 billion, StreetAccount data showed.
Meanwhile, sales in Nike’s other regions were lower than expected. In Europe, the Middle East and Africa, revenue fell 3% to $3.14 billion, below analysts’ expectations of $3.17 billion, according to StreetAccount. In China, sales rose 5% to $2.08 billion, slightly below analysts’ expectations of $2.09 billion. Sales in Asia Pacific and Latin America rose 3% to $1.65 billion, lower than analysts’ expectations of $1.69 billion, StreetAccount data showed.
As consumers spend less on discretionary items like clothes and shoes, Nike has spent the past few months focusing on what it can control: cutting costs and improving efficiency in order to boost profits and protect its margins.
In December, the company announced a broad restructuring plan to cut costs by about $2 billion over the next three years. The company also lowered its sales guidance as it warned of weaker demand in the coming quarters.
Two months later, the company said it would cut 2% of its workforce, or more than 1,500 jobs, so it could invest in growth areas such as running, women’s apparel and Jordan Brand.
Nike’s early cost-cutting plan, which includes simplifying product assortments, reducing management and increasing automation, may have helped the retailer beat profit forecasts in the three months ended Nov. 30, despite the company’s second consecutive Sales forecast for the quarter came in below expectations.
The cuts, along with “strategic pricing actions and lower ocean freight rates,” also boosted gross margin by 1.7 percentage points — the first time in at least six quarters that the company has seen gross margins improve compared to the prior year. The growth.
Nike’s gross profit margin continued to recover during the quarter. The retailer’s gross margin increased 1.5 percentage points to 44.8%, driven by “strategic pricing actions and lower shipping and logistics costs.” Nike said these gains were partially offset by higher product input costs and restructuring charges.
Nike is still considered the market leader in sneakers and apparel, but the category has become more crowded and retailers have to work harder to compete. Some analysts say Nike’s product lines have lost focus and say the company has fallen behind in innovation, ceding market share to new entrants such as Hoka and On Running, as well as legacy brands such as Brooks Running and New Balance.
Last month, Nike collaborated with NBA star Devin Booker to launch its latest basketball shoe, Book 1. But according to a research report by Jane Hali & Associates, the product was not well received because it “looks more like a casual sneaker than a basketball shoe.”
Senior analyst Jessica Ramirez said the company is now neutral on Nike’s long-term outlook compared with its previous positive rating because it’s unclear where the brand is headed.
She noticed that Nike had removed many products from its offerings, suggesting it was preparing to introduce new styles. But it’s unclear exactly what those changes will look like.
“They’ve said (these changes) are going to take some time,” Ramirez told CNBC ahead of Nike’s earnings release. “It’s a little concerning to know that they don’t have a solid plan that we know of yet.”
Read the full earnings report here.
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