uploads///Part

Why Nike Could Win the 1Q16 Heat in North America

By

Updated

Nike’s North America performance in 1Q16

Nike (NKE) may continue to see strong traction in North America in 1Q16. Currency factors that have tended to temper the company’s top-line growth in other geographies would have less of an impact on the segment, as Nike’s business in Canada is a relatively small part of the revenue pie.

Article continues below advertisement

Futures orders

Nike reported a 13% increase in futures orders in North America (both in constant-currency and reported terms) over the period of June–November 2015. Of this increase, 5% pertains to price increases, and 8% is due to volume gains.

Wholesale partners

The strong figures for futures orders are reflected in the performance of Nike’s wholesale partners. Nike (NKE) derived over 76% of its sales from the wholesale channel in fiscal 2015. Foot Locker (FL) and DICK’S Sporting Goods are Nike’s largest wholesale partners.

According to comments by Foot Locker CEO, Dick Johnson, same-store sales for Foot Locker rose by 9.6% in 2Q16. The second quarter ended on August 1, 2015, for both Foot Locker and DICK’S, and Foot Locker reported strong sales performances for Nike and its peers Under Armour (UA), Adidas (ADDYY), and Puma (PMMAF).

Same-store sales growth for DICK’S Sporting Goods (DKS) was more subtle, with total comps coming in at 1.2% in 2Q16, still well within the company’s guidance range. Comps were affected by the weak performance of DICK’s Golf Galaxy stores, where comps declined by 2.9%.

FL and DKS together constitute 2.2% of the portfolio holdings in the SPDR S&P Retail ETF (XRT).

In the next part of this series, we’ll look with more detail at Nike’s performance in North America—and how the company is strategizing to revive its golf category.

Advertisement

More From Market Realist