Nike’s Stock Punished after Mixed 3Q17 Results



What was behind the slide in Nike’s stock?

Nike’s (NKE) stock plunged over 7% on Wednesday, March 23, a day after the company reported mixed results for fiscal 3Q17.

While Nike beat the Wall Street expectations for earnings, the slower-than-expected growth in sales, the fall in future orders, and the glum outlook for fiscal 4Q17 all disappointed investors, leading to the slide in stock price.

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Key highlights 3Q17 results

The company posted EPS (earnings per share) growth of 24% YoY (year-over-year) to $0.68 cents, beating the consensus by a healthy margin of $0.15. Nike’s total sales improved 5% YoY (on a reported basis) to ~$8.4 billion, missing the consensus by ~$30 million.

For fiscal 4Q17, Nike expects a further slowdown and has predicted a mid-single-digit jump in sales, which would be lower than its fiscal 3Q17 growth.

Future orders

Nike’s future orders—a key measure of future demand—fell 1% on constant currency basis, missing the analyst expectation of a 3.5% increase. This fall was the first time in seven years that this key metric turned negative for Nike. But more worrisome that that were the company’s future North America orders, which fell 9%, indicating a slower demand going forward.

The company’s North America sales rose 3%, however, during the quarter. But Adidas (ADDYY) posted an increase of 24% in US sales in its last reported quarter. Notably, Adidas’s retro Superstar became the top-selling shoe in the US during 2016.

Notably, ETF investors seeking to add exposure to NKE can consider the SPDR Consumer Discretionary Select Sector ETF (XLY), which invests 3.1% of its portfolio in NKE.

International sales

Nike’s international sales remained steady. Western Europe showed a 10% rise on a currency neutral basis, while emerging markets showed a 13% rise, and Greater China showed a 15% rise.

Close competitor Under Armour (UAA) also posted solid international growth in the recent most quarter. UAA’s sales jumped an impressive 60% on constant currency basis, fueled by strong performances in Asia-Pacific.

But despite these company’s mixed results, Wall Street continues to be positive about Nike. Continue to the next part of this series for a look at the most recent analyst actions.


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