Nike's earnings jump 15% but growth slows in China

Nike shoes on sale in Rome. Its model of selling directly to consumers helped sales in North America climb 6 per cent, its second straight rise, showing signs of recovery after competition from rivals eroded sales in three out of the last four quarte
Nike shoes on sale in Rome. Its model of selling directly to consumers helped sales in North America climb 6 per cent, its second straight rise, showing signs of recovery after competition from rivals eroded sales in three out of the last four quarters.PHOTO: REUTERS

Revenues climb 10% with gains in all four of its regions

NEW YORK • Nike reported solid gains in both quarterly profit and revenues on Tuesday, but shares fell in after-hours trading on slowing growth in China.

The sports apparel and shoes giant reported a 15 per cent jump in earnings for fiscal first quarter 2019 to US$1.1 billion (S$ 1.5 billion).

Nike's revenues climbed 10 per cent to US$9.9 billion. Nike scored revenue gains in all four of its regions, with the strongest increase in China, where year-over-year revenues gained 24 per cent to US$1.4 billion.

However, that jump was a bit below the 35 per cent leap in year-over-year revenues reported in the prior quarter.

Nike's results were also pinched somewhat by higher costs, as it ramps up spending on sports marketing and its direct selling business.

Direct selling to consumers instead of through conventional retailers, along with innovation, is "driving strong momentum and balanced growth across our entire business", said chief executive Mark Parker.

Nike's results are the first since the company released an advertising campaign this month featuring American football quarterback Colin Kaepernick, who has been essentially blacklisted by the National Football League over his civil rights activism.

Some critics took to social media to destroy their Nike garb over Kaepernick, who has been criticised by United States President Donald Trump.

But many marketing experts consider the campaign a success and some data has shown an uptick in online sales since the spots were shown. The advertisement has been seen as a winner with non-white and younger consumers.

"The numbers are good, but they weren't wow enough," said Mr Jeff Auxier, founder and portfolio manager at Auxier Asset Management.

The company maintained its forecast for fiscal 2019.

Nike's direct-to-consumer model helped sales in North America climb 6 per cent, its second straight rise, showing signs of recovery after competition from rivals Adidas and Under Armour eroded sales in three out of the last four quarters.

"We returned to strong growth in North America even faster than what we had expected," Nike chief financial officer Andrew Campion said in a post-earnings call with analysts.

Shares of Nike fell 2.9 per cent in after-hours trading to US$82.61.

AGENCE FRANCE-PRESSE, REUTERS

A version of this article appeared in the print edition of The Straits Times on September 27, 2018, with the headline 'Nike's earnings jump 15% but growth slows in China'. Print Edition | Subscribe