Nike Lagged Analysts’ Earnings Expectations in Q4

Earnings lagged the expectations

Nike (NKE) lagged analysts’ EPS estimate for the fourth quarter after beating the earnings forecast for 27 consecutive quarters. Nike reported its fourth-quarter results after the financial markets closed on June 27. The stock fell 0.1% in the after-hours trading on June 27.

Nike’s adjusted EPS fell 10.1% on a year-over-year basis to $0.62 in the fourth quarter. The company missed analysts’ EPS estimate of $0.66.

Nike’s fourth-quarter EPS fell. Higher expenses associated with the company’s marketing efforts and investments in innovation and other growth initiatives more than offset the favorable impact of higher revenues, a gross margin improvement, and a reduced average share count. Higher taxes also hit Nike’s bottom line.

Nike Lagged Analysts’ Earnings Expectations in Q4

Fourth-quarter revenues

Nike’s revenues grew 4.0% to $10.18 billion and beat analysts’ estimate of $10.16 billion. Excluding the impact of currency headwinds, Nike’s fourth-quarter revenues would have grown 10%.

Nike’s overall revenues include the Nike brand and Converse. The Nike brand’s revenues grew 10% on a currency-neutral basis to $9.7 billion driven by growth in the NIKE Direct and wholesale channels. Converse’s revenues were flat on a YoY basis at $491 million on a currency-neutral basis. The strong growth experienced by the Converse business in Asia and the digital channel was offset by lower revenues from the US and Europe.

Outlook

Overall, Nike’s revenues grew 7.5% to $39.1 billion in fiscal 2019. The company’s fiscal 2019 revenue growth was 11% on a currency-neutral basis.

Nike expects it’s fiscal 2020 revenues to grow in the high single-digit range. Nike’s strong innovation pipeline, strong growth in digital sales, expansion in women’s apparel and footwear businesses, and opportunities in the international market are expected to drive its top-line growth.

Nike’s digital sales grew 35% in fiscal 2019. The company thinks that its digital business is on track to generate 30% of its overall revenues by 2023.