Nike (NKE) has exceeded analysts’ revenue expectations for the last five consecutive quarters. The company’s revenues rose 9.7% and 9.6%, respectively, in the first and second quarters of fiscal 2019. The company’s revenue rose 9.6% to $19.3 billion in the first six months of fiscal 2019 driven by growth across all the geographies in which it operates.
In the third quarter of fiscal 2019, Nike expects currency-neutral revenue growth in the high-single-digit range. Nike expects its fiscal 2019 revenue to rise in the high-single-digit to low-double-digit range on a currency-neutral basis. On a reported basis, Nike’s revenue is expected to be adversely affected by currency headwinds.
Rival Under Armour (UAA), which reported its results in February, generated revenue growth of 4.0% to $5.2 billion in 2018 backed by the performance of its international business.
Analysts expect Nike’s fiscal 2019 third-quarter revenue to rise 6.9% to $9.61 billion. They expect its fiscal 2019 revenue to rise 8.0% to $39.3 billion.
What might drive Nike’s top line growth?
In the second quarter of fiscal 2019, Nike’s revenue rose 14% on a currency-neutral basis due to strong momentum across all its geographies. Nike expects the improvement in its North American business to continue.
Nike’s Consumer Direct Offense strategy is helping it improve its performance across product categories and regions. Under this strategy, Nike is focused on innovation, driving greater speed and agility in the product creation process and supply chain, and enhancing its digital business.
Nike expects its new innovation platforms to propel over half of its incremental growth over the next five years. The company’s innovation platforms, including VaporMax, React, Air Max 270, and ZoomX, have driven more than 80% of its incremental growth year-to-date.
On a constant currency basis, Nike’s digital revenue rose 41% in the second quarter of fiscal 2019 and 38% in the first six months of fiscal 2019. Nike aims to enhance its digital penetration (including owned and partnered businesses) to 30% by 2023 compared to its current level of 15%.
Nike continues to seek international growth opportunities. The company believes that the rising interest in sports in international markets will be a key growth driver. Nike is also focused on improving its presence in the women’s category.
We’ll look at analysts’ earnings expectations for Nike in the next article.