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NIKE Q1 Earnings Beat on Margin Gain, Stock Falls on Revenue Miss
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Key Takeaways
NIKE's fiscal Q1 EPS beat estimates, while revenues fell 4.3% amid weakness in Sportswear and China.
NKE Direct revenues fell 8%, with Digital sales down 13% and owned-store revenues declining 5%.
NIKE expects high-single-digit fiscal 2027 revenue declines, while Pace targets $2.5B in savings.
NIKE, Inc. (NKE - Free Report) reported first-quarter fiscal 2027 earnings of 48 cents per share, down 2% year over year. The figure beat the Zacks Consensus Estimate of 43 cents by 11.6%. Improved gross margin and disciplined expense management supported the bottom line.
Revenues fell 4.3% year over year to $11.2 billion and missed the Zacks Consensus Estimate of $11.4 billion by 1.6%. NIKE performance grew in the high single digits, but weakness in Sportswear, Jordan Brand and Greater China remained a drag.
NIKE’s shares have decreased more than 8% in after-hours trading session yesterday. This Zacks Rank #4 (Sell) stock has dipped 19.4% in the past three months versus the industry’s 17.8% decline.
Image Source: Zacks Investment Research
NKE's Channel Mix Remains Under Pressure
NIKE Brand revenues totaled $10.95 billion, down 4% on both reported and currency-neutral bases. Wholesale revenues slipped 1% to $6.8 billion, with declines in Greater China were partly offset by growth in North America. Our model anticipates NIKE Brand revenues to be $11.1 billion.
NIKE Direct revenues declined 8% to $4.14 billion, and fell 9% on a currency-neutral basis. NIKE Brand Digital sales fell 13%, while NIKE-owned store revenues decreased 5%. Converse revenues dropped 28% to $263 million as all territories posted declines.
North America revenues increased 2% to $5.1 billion. The region benefited from performance products, with management highlighting Running, Global Football and Basketball as key contributors. We expect North America revenues to increase 2.2% year over year to $5.1 billion for the fiscal first quarter.
EMEA revenues fell 5% to $3.2 billion, while Greater China revenues declined 22% on a reported basis to $1.2 billion and 26% on a currency-neutral basis. Asia Pacific & Latin America revenues decreased 2% to $1.5 billion but were flat excluding currency changes. Our model anticipates revenues to decline 4.4% year over year to $3.2 billion for EMEA, 16.4% to $1.3 billion for Greater China and 1.7% to $1.5 billion for Asia Pacific & Latin America.
NKE's Product Portfolio Shows Diverging Momentum
NIKE Brand Footwear revenues declined 6% to $7 billion, while apparel revenues rose 2% to $3.4 billion. Equipment revenues fell 3% to $611 million.
Management said NIKE Sportswear, which represented just under half of quarterly revenues, declined in the low double digits. Jordan Brand accounted for 13% of the company’s global business and fell in the mid-teens, while the Performance portfolio benefited from double-digit growth in Running, Global Football, Tennis and Golf.
NIKE's Margin and Cost Trends Improve
Gross margin expanded 60 basis points year over year to 42.8%, mainly on lower warehousing and logistics costs. Management also cited supply-chain cost actions and foreign-exchange tailwinds, partly offset by higher discounts and channel mix pressure. We had expected a 40-basis-point expansion in gross margin.
Selling and administrative expenses declined 3% to $3.9 billion. Demand creation expense rose 5% to $1.3 billion on increased brand marketing tied to key sports events. Operating overhead expense fell 6% to $2.7 billion on lower wage-related and other administrative costs.
NKE's Pace Program Targets Structural Savings
NIKE introduced Pace, an operating-model transformation designed to scale its Sport Offense, modernize the supply chain and streamline the organization. The company also plans to establish a new campus in Bengaluru, India. As part of Pace, it intends to organize its operations across three geographies.
Pace is expected to generate about $2.5 billion in cumulative savings through fiscal 2031. NIKE expects roughly $1 billion of pre-tax charges over the program's life. It expects to achieve about $0.3 billion savings in fiscal 2027.
NKE's Balance Sheet Supports Ongoing Investment
Inventories totaled $7.8 billion as of quarter-end, down 3% year over year. Cash and equivalents amounted to $6.9 billion, while short-term investments totaled $1.5 billion.
NIKE returned about $610 million to shareholders through dividends during the quarter, up 3% from the prior-year period’s level. Management said the dividend remains a significant capital-allocation priority as the company funds its portfolio and operating-model initiatives.
NIKE's Fiscal 2027 Outlook Signals More Pressure
For fiscal 2027, revenues are expected to decline in the high-single-digit range. Management expects actions to reduce supply in Sportswear, Jordan Brand and Greater China to weigh on revenues through the rest of the current fiscal year and into fiscal 2028.
Adjusted earnings per share are projected to be in the band of $1.15-$1.35, excluding about 15 cents of Pace-related restructuring impact in fiscal 2027. EBIT is expected to decrease by a higher percentage than revenues, while SG&A is projected to be down year over year.
Duluth Holdings delivered a trailing four-quarter earnings surprise of 122.5%, on average. The Zacks Consensus Estimate for DLTH’s current financial-year EPS indicates a rise of 18.6% from the year-ago reported number.
Columbia Sportswear (COLM - Free Report) , which engages in marketing and distribution of outdoor and active lifestyle apparel, footwear and accessories, currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for COLM’s current financial-year sales is expected to rise 1.9% from the year-ago reported figure. COLM delivered a trailing four-quarter earnings surprise of 36%, on average.
Gildan Activewear Inc. (GIL - Free Report) , which is a manufacturer and marketer of premium quality branded basic activewear, currently carries a Zacks Rank #2.
GIL delivered a trailing four-quarter earnings surprise of 2.5%, on average. The Zacks Consensus Estimate for Gildan Activewear’s current financial-year sales indicates growth of 66.3% from the year-ago recorded number.
View the Zacks #1 Rank List
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NIKE Q1 Earnings Beat on Margin Gain, Stock Falls on Revenue Miss
Key Takeaways
NIKE, Inc. (NKE - Free Report) reported first-quarter fiscal 2027 earnings of 48 cents per share, down 2% year over year. The figure beat the Zacks Consensus Estimate of 43 cents by 11.6%. Improved gross margin and disciplined expense management supported the bottom line.
Revenues fell 4.3% year over year to $11.2 billion and missed the Zacks Consensus Estimate of $11.4 billion by 1.6%. NIKE performance grew in the high single digits, but weakness in Sportswear, Jordan Brand and Greater China remained a drag.
NIKE’s shares have decreased more than 8% in after-hours trading session yesterday. This Zacks Rank #4 (Sell) stock has dipped 19.4% in the past three months versus the industry’s 17.8% decline.
Image Source: Zacks Investment Research
NKE's Channel Mix Remains Under Pressure
NIKE Brand revenues totaled $10.95 billion, down 4% on both reported and currency-neutral bases. Wholesale revenues slipped 1% to $6.8 billion, with declines in Greater China were partly offset by growth in North America. Our model anticipates NIKE Brand revenues to be $11.1 billion.
NIKE Direct revenues declined 8% to $4.14 billion, and fell 9% on a currency-neutral basis. NIKE Brand Digital sales fell 13%, while NIKE-owned store revenues decreased 5%. Converse revenues dropped 28% to $263 million as all territories posted declines.
NIKE, Inc. Price, Consensus and EPS Surprise
NIKE, Inc. price-consensus-eps-surprise-chart | NIKE, Inc. Quote
NIKE's Geographic Trends Stay Mixed
North America revenues increased 2% to $5.1 billion. The region benefited from performance products, with management highlighting Running, Global Football and Basketball as key contributors. We expect North America revenues to increase 2.2% year over year to $5.1 billion for the fiscal first quarter.
EMEA revenues fell 5% to $3.2 billion, while Greater China revenues declined 22% on a reported basis to $1.2 billion and 26% on a currency-neutral basis. Asia Pacific & Latin America revenues decreased 2% to $1.5 billion but were flat excluding currency changes. Our model anticipates revenues to decline 4.4% year over year to $3.2 billion for EMEA, 16.4% to $1.3 billion for Greater China and 1.7% to $1.5 billion for Asia Pacific & Latin America.
NKE's Product Portfolio Shows Diverging Momentum
NIKE Brand Footwear revenues declined 6% to $7 billion, while apparel revenues rose 2% to $3.4 billion. Equipment revenues fell 3% to $611 million.
Management said NIKE Sportswear, which represented just under half of quarterly revenues, declined in the low double digits. Jordan Brand accounted for 13% of the company’s global business and fell in the mid-teens, while the Performance portfolio benefited from double-digit growth in Running, Global Football, Tennis and Golf.
NIKE's Margin and Cost Trends Improve
Gross margin expanded 60 basis points year over year to 42.8%, mainly on lower warehousing and logistics costs. Management also cited supply-chain cost actions and foreign-exchange tailwinds, partly offset by higher discounts and channel mix pressure. We had expected a 40-basis-point expansion in gross margin.
Selling and administrative expenses declined 3% to $3.9 billion. Demand creation expense rose 5% to $1.3 billion on increased brand marketing tied to key sports events. Operating overhead expense fell 6% to $2.7 billion on lower wage-related and other administrative costs.
NKE's Pace Program Targets Structural Savings
NIKE introduced Pace, an operating-model transformation designed to scale its Sport Offense, modernize the supply chain and streamline the organization. The company also plans to establish a new campus in Bengaluru, India. As part of Pace, it intends to organize its operations across three geographies.
Pace is expected to generate about $2.5 billion in cumulative savings through fiscal 2031. NIKE expects roughly $1 billion of pre-tax charges over the program's life. It expects to achieve about $0.3 billion savings in fiscal 2027.
NKE's Balance Sheet Supports Ongoing Investment
Inventories totaled $7.8 billion as of quarter-end, down 3% year over year. Cash and equivalents amounted to $6.9 billion, while short-term investments totaled $1.5 billion.
NIKE returned about $610 million to shareholders through dividends during the quarter, up 3% from the prior-year period’s level. Management said the dividend remains a significant capital-allocation priority as the company funds its portfolio and operating-model initiatives.
NIKE's Fiscal 2027 Outlook Signals More Pressure
For fiscal 2027, revenues are expected to decline in the high-single-digit range. Management expects actions to reduce supply in Sportswear, Jordan Brand and Greater China to weigh on revenues through the rest of the current fiscal year and into fiscal 2028.
Adjusted earnings per share are projected to be in the band of $1.15-$1.35, excluding about 15 cents of Pace-related restructuring impact in fiscal 2027. EBIT is expected to decrease by a higher percentage than revenues, while SG&A is projected to be down year over year.
Key Picks in the Consumer Discretionary Space
Duluth Holdings Inc. (DLTH - Free Report) , which deals in casual wear, workwear and accessories for men and women, currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Duluth Holdings delivered a trailing four-quarter earnings surprise of 122.5%, on average. The Zacks Consensus Estimate for DLTH’s current financial-year EPS indicates a rise of 18.6% from the year-ago reported number.
Columbia Sportswear (COLM - Free Report) , which engages in marketing and distribution of outdoor and active lifestyle apparel, footwear and accessories, currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for COLM’s current financial-year sales is expected to rise 1.9% from the year-ago reported figure. COLM delivered a trailing four-quarter earnings surprise of 36%, on average.
Gildan Activewear Inc. (GIL - Free Report) , which is a manufacturer and marketer of premium quality branded basic activewear, currently carries a Zacks Rank #2.
GIL delivered a trailing four-quarter earnings surprise of 2.5%, on average. The Zacks Consensus Estimate for Gildan Activewear’s current financial-year sales indicates growth of 66.3% from the year-ago recorded number.