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Nike’s Sales Growth Projections for Fiscal 2Q16

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Dec. 18 2015, Published 4:01 p.m. ET

Analyzing the major sales drivers affecting Nike’s results

According to consensus Wall Street analyst estimates, Nike (NKE) is expected to post sales of $7.8 billion in fiscal 2Q16. That’s an increase of 5.7% over the comparable quarter of the previous year. The company expects a mid-single-digit sales growth in both fiscal 2Q16 and fiscal 2016 in reported terms.[1. According to comments by Andy Campion, chief financial officer of Nike]

However, Nike’s top line is expected to grow at a low-teens rate in currency-neutral terms in fiscal 2Q16. The adverse impact from the stronger US dollar saw Nike’s top line grow by 14% in constant currency terms and by 5.4% in reported terms, to $8.4 billion in fiscal 1Q16.

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Impact of the dollar

The impact of the US dollar appreciating against most international currencies has disadvantaged Nike’s results relatively more than its peers. That’s partly due to Nike’s higher international sales mix. Nike derived 55.1% of its sales from outside North America (United States and Canada) in fiscal 2015, compared to 30.9% for Skechers (SKX) in 2014.

Its competitor Adidas (ADDYY), which reports results in euros, has received a boost to its top line due to the depreciation of the euro. While Adidas’s currency-neutral sales rose by 9% in the first nine months of 2015, reported sales rose 17% to 12.7 billion euros.

Wholesale channel growth

Nike is expecting to grow its global wholesale channel revenue at a mid to high single-digit CAGR (compounded annual growth rate) over the next five years through fiscal 2020.

Results for Nike’s distribution partners have been mixed in their last respective quarters. DICK’s Sporting Goods (DKS) and Finish Line (FINL) reported tepid same-store sales growth of 0.4% and 1.5%, respectively, in their last respective quarters.[1. The last fiscal quarter ended October 31, 2015, for DKS and August 29, 2015, for FINL]

DKS’s sales growth came in below the company guidance of 1%–3%. The growth moderation came about partly due to comp (comparable) declines of 2.9% in DKS’s Golf Galaxy retail format.

Foot Locker (FL), Nike’s largest wholesale partner, reported store comps of 8.7% in its last quarter. Sales trends were strong in basketball marquee footwear, the running category, and Jordan brands.[1. Based on comments by FL CEO (chief executive officer) and president Richard Johnson]

ETF exposure

Nike constitutes ~1.4% of the portfolio holdings of the First Trust Consumer Discretionary AlphaDEX Fund (FXD) and ~0.49% of the holdings of the SPDR S&P 500 ETF (SPY).

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