• Jini Kong

Nike sales, future orders disappoint as adidas gains ground

Nike, the world’s sportswear powerhouse, will be looking a little more nervously over its shoulder at rival adidas’ resurgence. How so? Q4 sales gains hardly impressed and future orders failed to match expectations late Tuesday.

Shares of the world’s largest athletic sportswear company fell over 4% to $50.95 in extended trading.

While Nike still dominates in its own back yard analysts have said that it is losing ground to adidas with domestic rival Under Armour also gaining ground.

“You are seeing more people moving towards adidas,” Edward Jones analyst Brian Yarbrough said, noting the German giant is “making a comeback” and some US retailers were giving more shelf space to Nike’s competition. On Friday, Finish Line put much of its Q1 sales success down to “explosive growth in our adidas business.”

Although Nike’s total Q4 revenue rose nearly 6% to $8.24bn, driven by international gains, the figure fell below analysts’ $8.28bn expectation. It was also the third straight quarter Nike has missed its mark.

North America sales were flat at $3.74bn, weighed down by a fall in demand for apparel and equipment, while core footwear sales rose a slender 2%.

At least there was double-digit growth to report in Western Europe, Greater China, Japan and Emerging Markets.

For the first time, Nike also reported sales of its Jordan Brand segment footwear and apparel, rising 18% to $2.8bn for the fiscal year ended May 31, while Nike brand basketball sales fell 1% to $1.4bn.

But Nike’s final quarter total net income fell 2% to $846m and EPS was flat at 49 cents, and a penny higher than analysts’ estimates.

Gross margins also fell to 45.9% from 46.2% a year ago as higher average selling prices were more than offset by higher product costs, the hit of clearing excess inventory in North America and unfavourable foreign exchange rates.

In the latest period, Nike sponsorship costs increased 6.6% in the period to $873m.

Future orders for June-November delivery in North America rose 6% but fell short of analysts’ expectations for 9% growth, signaling a slowing pace in its biggest market. That compared with growth of 13% a year earlier and an increase of 10% in Q3, signaling a slowing pace in its core domestic market.

CFO Andy Campion said Nike was up against tough year-ago comparisons and “continues to see strong underlying momentum in the fundamentals that drive our growth and profitability.”

But CEO Mark Parker preferred to focus on the positives Tuesday saying: “Our consistent growth is fueled by innovation, which is why fiscal 2016 was such a breakthrough year for NIKE in everything we do.

“From product to manufacturing to how we serve our consumers – more personally and at scale – we’ve raised the bar of what’s possible. It’s a great time to be in sports, and the Nike Brand has never been stronger.”

He added: “Fueled by our unrivaled roster of athletes, fiscal 2017’s calendar of sport moments promises to build on our business momentum and inspire consumers.”

#Nike #Adidas

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