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Nike: US Business Contracts, International Business Still Strong

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International sales continue to drive Nike’s business

As we discussed in the previous part of this series, Nike’s (NKE) 1Q18 (first quarter of 2018) revenue remained flat on a reported and currency-neutral basis, as strength in the company’s International and Direct businesses was offset by a fall in North American wholesale sales.

North American sales contracted 3% during the quarter as the company struggled to manage marketplace supply. International markets, however, showed strong momentum. International growth was led by a 12% (constant-currency) increase in Greater China sales, followed by 6% and 5% rises in the APLA (Asia Pacific & Latin America) and EMEA (Europe, Middle East & Africa) businesses, respectively. Apparel sales growth was higher than Footwear growth in all three areas.

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Looking forward

Management reaffirmed its guidance for mid-to-high single-digit growth in revenues based on its expectations of a continued increase in international sales.

“Looking ahead to the rest of fiscal 2018, we will ignite NIKE’s next horizon of global growth through the strength of our brand, the power of our innovative products and the most personal, digitally-connected experiences in our industry,” said Mark Parker, chairman, president, and CEO of NIKE.

However, for North America, management expects ongoing challenges to continue to hit the business in the short term. “We believe there will be short-term headwinds within the U.S. retail landscape that will dampen growth,” commented Andy Campion, Nike’s executive vice president and chief financial officer.

ETF investors seeking to add exposure to NKE can consider the SPDR Dow Jones Industrial Average ETF (DIA), which invests 1.6% of its portfolio in NKE.

Read the next part of this series to learn about the company’s 1Q18 margins and profitability.

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