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Shares of Nike Inc. (NKE - Free Report) slipped on Wednesday, down over 6% to $54.40 per share after the sportswear giant reported a mixed third quarter and timid guidance for the current quarter.
The Oregon-based company posted earnings of $0.68 per share, representing growth of 24% year-over-year and beating the Zacks Consensus Estimate of $0.52 per share. Though revenues grew 5% year-over-year to $8.42 billion, it fell short of the Zacks Consensus Estimate of $8.44 billion.
One of the biggest factors that caused Nike's stock to drop is that the company’s future orders declined by 1%, excluding the effects of currency fluctuation. Bloomberg reported that analysts had predicted a 3.4% gain. The sportswear maker forecasted single digit revenue growth for the current quarter as well.
Nike has been facing increasing competition from Under Armour Inc. (UAA - Free Report) and Adidas (ADDYY - Free Report) . Nike's North America sales (footwear, apparel, and equipment) only went up close to 3%, while Adidas’ North America sales increased by 24%, reported in their latest quarterly earnings.
The resurgent German sportswear retailer has been on the rebound recently. Besides its Russia/CIS region, the three stripes brand saw sales growth between 16% and 28% in the rest of the world. Not only did Adidas post an 18% currency-neutral increase in sales for 2016, but the company also expects sales to grow between 11% and 13% for fiscal 2017. (To learn more about Adidas, check out this Zacks article: Adidas (ADDYY - Free Report) Stock Jumps 9% on Strong Earnings and Upbeat Guidance)
Despite the new challengers in the market, Nike has been slow to adapt to consumers' shift to digital shopping, impacting their store traffic. Retail companies, who were late on realizing that e-commerce is now the foundation of shopping, not just an additive option, now risk going out of business.
"To expand our leadership and ignite Nike's next phase of growth, we increase speed throughout the business and creating more direct connections with consumers leveraging digital and membership," said Mark Parker, President and CEO of Nike, in the earnings report.
In the midst of dark clouds, investors in Nike do have something to look forward. The company's net income increased 20% to $1.1 billion, and diluted earnings per share rose 24 % as a result.
Furthermore, Nike’s mobile app, Nike Plus, is seeing more sales. Yahoo Finance reported that digital shoppers spend two times as much per transaction as brick-and-mortar shoppers.
“The one thing that Mark Parker said, and we just heard it on the call was that they are doubling down on innovation,” Matthew McClintock, a Barclays analyst, said in an interview with CNBC. “The fear that Nike’s innovations are over is overstated.”
McClintock concluded that the key takeaway should be Nike's focus on the next half of the year.
Nike holds a Zacks Rank #3 (Hold).
Stocks that Aren't in the News…Yet
You are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. Many of these companies are almost unheard of by the general public and just starting to get noticed by Wall Street. They have been pinpointed by the Zacks system that nearly tripled the market from 1988 through 2015, with a stellar average gain of +26% per year
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Nike (NKE) Stock Tumbles on Mixed Q3 Results
Shares of Nike Inc. (NKE - Free Report) slipped on Wednesday, down over 6% to $54.40 per share after the sportswear giant reported a mixed third quarter and timid guidance for the current quarter.
The Oregon-based company posted earnings of $0.68 per share, representing growth of 24% year-over-year and beating the Zacks Consensus Estimate of $0.52 per share. Though revenues grew 5% year-over-year to $8.42 billion, it fell short of the Zacks Consensus Estimate of $8.44 billion.
One of the biggest factors that caused Nike's stock to drop is that the company’s future orders declined by 1%, excluding the effects of currency fluctuation. Bloomberg reported that analysts had predicted a 3.4% gain. The sportswear maker forecasted single digit revenue growth for the current quarter as well.
Nike has been facing increasing competition from Under Armour Inc. (UAA - Free Report) and Adidas (ADDYY - Free Report) . Nike's North America sales (footwear, apparel, and equipment) only went up close to 3%, while Adidas’ North America sales increased by 24%, reported in their latest quarterly earnings.
The resurgent German sportswear retailer has been on the rebound recently. Besides its Russia/CIS region, the three stripes brand saw sales growth between 16% and 28% in the rest of the world. Not only did Adidas post an 18% currency-neutral increase in sales for 2016, but the company also expects sales to grow between 11% and 13% for fiscal 2017. (To learn more about Adidas, check out this Zacks article: Adidas (ADDYY - Free Report) Stock Jumps 9% on Strong Earnings and Upbeat Guidance)
Despite the new challengers in the market, Nike has been slow to adapt to consumers' shift to digital shopping, impacting their store traffic. Retail companies, who were late on realizing that e-commerce is now the foundation of shopping, not just an additive option, now risk going out of business.
"To expand our leadership and ignite Nike's next phase of growth, we increase speed throughout the business and creating more direct connections with consumers leveraging digital and membership," said Mark Parker, President and CEO of Nike, in the earnings report.
In the midst of dark clouds, investors in Nike do have something to look forward. The company's net income increased 20% to $1.1 billion, and diluted earnings per share rose 24 % as a result.
Furthermore, Nike’s mobile app, Nike Plus, is seeing more sales. Yahoo Finance reported that digital shoppers spend two times as much per transaction as brick-and-mortar shoppers.
“The one thing that Mark Parker said, and we just heard it on the call was that they are doubling down on innovation,” Matthew McClintock, a Barclays analyst, said in an interview with CNBC. “The fear that Nike’s innovations are over is overstated.”
McClintock concluded that the key takeaway should be Nike's focus on the next half of the year.
Nike holds a Zacks Rank #3 (Hold).
Stocks that Aren't in the News…Yet
You are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. Many of these companies are almost unheard of by the general public and just starting to get noticed by Wall Street. They have been pinpointed by the Zacks system that nearly tripled the market from 1988 through 2015, with a stellar average gain of +26% per year
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