The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
BEAVERTON, United States — Nike surged in late trading after reporting strong sales in China and North America, a sign that its controversial ad campaign featuring quarterback-turned-activist Colin Kaepernick may have paid off.
Earnings amounted to 52 cents a share in the second fiscal quarter, beating the 46-cent estimate of analysts. Revenue in most of its major regions also topped projections.
Key Insights
This is Nike's first earnings report that includes the impact from its "Just Do It" campaign featuring Kaepernick, a gambit that triggered a stock dip followed by a rally. Nike chief executive Mark Parker has previously said the ads drove an uptick in traffic and engagement.
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The surging sales in China reassured investors after Nike missed estimates in the region last quarter. As the shoe industry braces for a worsening trade war, Nike’s diversified supply chain makes it less vulnerable than many competitors. About a quarter of Nike’s goods come from China, versus more than 60 percent for Skechers.
The company also posted its third straight quarter of growth in its home market. Nike had previously gone through a yearlong slump in North America, during which rival Adidas saw rapid growth in the region.
Gross margin beat analyst estimates, alleviating concerns over the company’s profitability and production costs. It’s also a potential signal that Nike’s major push to lessen its reliance on retail partners is paying off. Sales made through Nike’s direct channels — like its website, app or stores — have much better margins.
Market Reaction
Nike shares rose as much as 8.8 percent to $73.48 in after-hours trading.
The stock had reached an intraday high of $86.04 in September before slipping with the rest of the market over the last few months.
By Eben Novy-Williams; editor: Nick Turner.
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