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Looking at Nike’s Top Line ahead of 1Q18 Results

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Evaluating Nike’s top line

Nike (NKE) clocked total sales of $34.4 billion in fiscal 2017, a 6.0% rise compared to the previous year. Currency continued to be a significant headwind. Excluding the negative impact, its top line rose 8.0% during the year.

Top-line growth was primarily driven by strength in the international markets. Greater China, Western Europe, and Emerging Markets posted double-digit growth in all the quarters. North America sales rose ~3.0% YoY (year-over-year) compared to the average 10.0% rise recorded between fiscal 2014 and fiscal 2016.

The company’s DTC (direct-to-customer) channel has notably remained strong, recording double-digit growth in all four quarters. For the fiscal year, DTC revenues rose 18.0%, driven by a 30.0% rise in online sales and a 7.0% rise in same-store sales.

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Looking forward

Nike’s management continues to expect robust growth in its international geographies in fiscal 2018 and is looking for mid to high single-digit growth (currency-neutral) in total revenues for the year. However, it expects $700.0 million in foreign exchange headwinds, which would reduce the top-line growth to the mid-single digits.

For the first quarter of 2018, total sales are expected to remain flat due to tough previous year comparisons. Wall Street is in line with Nike’s management and has predicted a 0.30% YoY growth in first-quarter sales to $9.1 billion.

ETF investors seeking to add exposure to NKE can consider the Consumer Discretionary Select Sector SPDR ETF (XLY), which invests 2.8% of its portfolio in NKE.

In the next part, we’ll look at Nike’s margins and profitability expectations.

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